Fair dos to Dan Price, CEO of Gravity Payments, a Seattle-based payment processing company, who has just announced plans to raise the minimum wage at the business to $70,000 within the next three years. Not only that, but he has also cut his own salary from $1 million to $70,000 until he achieves that goal and said he will use more of the company’s profits to help get there.
For people working in the company, this is big news. Around 30 of Gravity Payments’ 120 workers will see their salaries double and another 40 will enjoy significant increases in pay. The first step has been an increase to $50,000 for employees earning below that figure.
For his part, Price told ABC News that as a single man with a three bed house, a dog and an Audi car that he bartered for at a local dealer in exchange for credit card processing from Gravity Payments: “I may have to scale back a little bit, but nothing I’m not willing to do.”
His decision was spurred by reading research published in September 2010 by Daniel Kahneman and Angus Deaton which suggested that while emotional well-being rose with income, there was no further progress beyond a figure of $75,000.
Price was also concerned at the high rates of pay for CEOs. He told ABC News: “My salary wasn’t $1 million because I need that much to live, but that’s what it would cost to replace me as a CEO. I think CEO pay is way out of whack. It ended up impacting me, because I want the company to be sustainable even if something happens to me.”
In a separate interview with CNN Money, Price claimed he wasn’t the only CEO seeking to close the income gap between executives and workers. He revealed that almost 100 other supportive CEOs had contacted him via e-mail and text. “I don’t know if we’ll see enough to move the needle, but I think people of my generation are committed to making a change.”
Survival of the prudent
While Price and Gravity Payments have garnered a lot of media coverage from the story, there are quite a few other examples of companies operating in an unorthodox fashion and surviving.
Michael Moore’s documentary Capitalism: A Love Story, highlighted the Alvarado Street Bakery, a worker cooperative established in 1979. Each employee receives a share in the cooperative that grants them an equal vote on business matters, such as employee benefits, salaries and the reinvestment of profits. In 2009, more than half of the employees had been with the company for over 15 years and the average worker earned between $65,000 and $70,000 a year.
Another example featured by Moore was Isthmus Engineering but there are more and Wikipedia has a reasonably long list of notable cooperative enterprises globally that are owned and managed by groups of individuals for their mutual benefit.
While it would be unrealistic to expect a rash of cooperatives to appear overnight or for CEOs to suddenly slash their pay by 93%, the publicity surrounding Price’s decision could help to generate a wider discussion on the merits of rates of executive pay. In recent years, the disparity between worker and executive pay has widened dramatically despite little or no evidence that sharp rises in executive pay have been reflected by a commensurate increase in company performance. The technology sector has not been immune from this trend.
Will anything be done about it? Probably not, but at least people might start talking about it.
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