Gravity Payment is the story of a young CEO who had always believed that the American wage system is flawed such that it promotes high inequalities in salaries. He also co-founded the company with his brother.
In April 2015, Dan Price, CEO of Gravity payments announced the increase in the minimum wage of all his employees earning below $70k to $70k. this move brought a lot of applause to Dan, the affected staff were happy, and some were shocked. This increase was to be effected over the next 3years.
To put more context into this story, BBC’s write-up gave it context below made it make more sense – Dan Price was hiking with his friend Valerie in the Cascade mountains that loom majestically over Seattle, when he had an uncomfortable revelation.
As they walked, she told him that her life was in chaos, that her landlord had put her monthly rent up by $200 and she was struggling to pay her bills.
It made Price angry. Valerie, who he had once dated, had served for 11 years in the military, doing two tours in Iraq, and was now working 50 hours a week in two jobs to make ends meet.
“She is somebody for whom service, honor, and hard work just define who she is as a person,” he says.
Even though she was earning around $40,000 a year, in Seattle that wasn’t enough to afford a decent home. He was angry that the world had become such an unequal place. And suddenly it struck him that he was part of the problem.
In 1965, CEOs in the US earned 20 times more than the average worker but by 2015 it had risen to 300 times (in the UK, the bosses of FTSE 100 companies now earn 117 times the salary of their average worker).
After crunching the numbers, he arrived at the figure of $70,000. He realized that he would not only have to slash his salary but also mortgage his two houses and give up his stocks and savings. He gathered his staff together and gave them the news.
He’d expected scenes of celebration, but at first, the announcement floated down upon the room in something of an anti-climax, Price says. He had to repeat himself before the enormity of what was happening landed.
Five years later, Dan laughs about the fact that he missed a key point in the Princeton professors’ research. The amount they estimated people need to be happy was $75,000.
Still, a third of those working at the company would have their salaries doubled immediately. He called his staff to inform them of this good news.
While he was celebrated by the media, some key stakeholders were angry at this decision and there were mixed reactions.
The brother felt unjustly treated and he took his brother to court. A number of the employees too were not happy about the decision – some think that now everyone will know their salaries and more people will tend to ask for loans. Some employees even resigned based on this.
The Unusual CEO