CEO who set his firm's minimum wage to $70K hits hard times

 

3 months ago, Mr. Price, 31, (left - with his brother) announced he was setting a new minimum salary of $70,000 at his Seattle credit card processing firm, Gravity Payments, and slashing his own million-dollar pay package to do it, but has fallen on hard times as a result of his bold move.


He wasn’t thinking about the current political clamor over low wages or the growing gap between rich and poor, he said. He was just thinking of the 120 people who worked for him and, let’s be honest, a bit of free publicity.

The idea struck him when a friend shared her worries about paying both her rent and student loans on a $40,000 salary. He realized a lot of his own employees earned that or less.

Yet almost overnight, a decision by one small-business man in the northwestern corner of the country became a swashbuckling blow against income inequality.

The move drew attention from around the world — including from some outspoken skeptics and conservatives like Rush Limbaugh, who smelled a socialist agenda — but most were enthusiastic.

2 of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees.

Then potentially the worst blow of all: Less than two weeks after the announcement, Mr. Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences, filed a lawsuit that potentially threatened the company’s very existence. With legal bills quickly mounting and most of his own paycheck and last year’s $2.2 million in profits plowed into the salary increases, Dan Price said, “We don’t have a margin of error to pay those legal fees.”

'There's no perfect way to do this and no way to handle complex workplace issues that doesn't have any downsides or trade-offs,' Price said.

In court documents, Lucas Price accused his brother of violating his rights as a minority shareholder in Gravity Payments while giving himself an 'excessive' $1 million salary.

The complaints were initially signed March 13 and filed April 24, 11 days after Dan Price announced the pay raises for the 120 employees of Gravity Payments. 

The previous average salary at the company was $48,000.

Price has an estimated net worth of $3 million. 

Lucas Price claims in court documents that his brother excessively paid himself a $1 million dollar salary in the years before the big announcement, an alleged violation of an agreement limiting his compensation.

'We don’t have a margin of error to pay those legal fees,' Dan Price said.

Attorney Greg Hollon, who represents Lucas Price, says the lawsuit is in response to a series of events over years not just the announcement.

'I deeply regret the rift this has caused in my relationship with my brother, who I love, and I'm hoping and praying for a quick resolution that's positive for everybody.'

The brothers co-founded the merchant-services company Price & Price in 2004, but appear to have had a long-standing disagreement over how the company should be run.

Dan Price was named CEO in 2006, and two years later the company was restructured as Gravity Payments, with Lucas Price agreeing to become a minority shareholder. 

What few outsiders realized, however, was how much turmoil all the hoopla was causing at the company itself. To begin with, Gravity was simply unprepared for the onslaught of emails, Facebook posts and phone calls. The attention was thrilling, but it was also exhausting and distracting.

And with so many eyes focused on the firm, some hoping to witness failure, the pressure has been intense.

More troubling, a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase, despite repeated assurances to the contrary, also left. While dozens of new clients, inspired by Mr. Price’s announcement, were signing up, those accounts will not start paying off for at least another year. To handle the flood, he has already had to hire a dozen additional employees, now at a significantly higher cost, and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.

NY Times