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Seattle CEO Cuts $1 Million Salary To $70K, Raises Employee Salaries
First time accepted submitter fluffernutter writes Dan Price started his company, Gravity Payments, out of university when he was 19. Now he is cutting his $1 million salary to $70,000 and promising to raise all his employees' salaries. Dan is quoted as saying he made the move because "I think this is just what everyone deserves."Good business practice? Silly boosterism? Enlightened self-interest?
If you dig through more articles it states that he'll be paid $70k a year until his business starts making above a certain amount again.
So far I've seen this guy on Facebook, the Today show, Reddit and now Slashdot. It's making its rounds and is a great PR move.
Meh, like most CEOs out there Im sure he makes most of his income in bonuses and stock, I doubt that he'll really notice the drop in income from his annual salary. This is a publicity stunt and nothing more. /cynicism.
The company was projected to make $2.2 million in profit and he was going to make $1 million in salary. He is also cutting into 75-80% of his profits to pay for this wage increase, so the total amount of money being spent is an extra $2.6 million. He has one partner and I couldn't find the equity split, but the owner is likely going from around $2.5 million in total compensation down to about $400k. That is a pretty large difference.
The owner is still making a lot of money, but I don't think this gesture should be written off as a publicity stunt.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
The company was making $2.2 million in profits, and 75-80% of that is also going into this wage increase. So he is significantly lowering his total compensation by a drastic amount (probably around 20% of his previous compensation).
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
Forget about the class warfare, OK? Even Bruce Springsteen would agree that as long as everyone is winning, it shouldn't matter if someone is winning more. There are few places in the USA where $70K/year is not a good salary. I doubt those high-fiving employees who just had their salaries doubled think it's a "publicity stunt".
Singlehandedly, he returned $930,000 to the bottom line of his company. Most of us can't make such a claim. But that only accounts for boosting about 25 people who were making $34K to $70K, so unless his company is quite small, I'm sure other strategies were employed. We'll see how effective those strategies are over the coming years. That will tell us if he's just a good guy, or a great CEO.
From the images on their web it looks like they have about 40-ish employees. Going down from 1M to 70k would give about 23k extra per person. If the average salary before was around 50k then this alone would be sufficient to cover that.
But even for very large companies where 1M distributed over the employees doesn't give more than a couple of hundred extra each year I think it could be beneficial.
The symbolic gesture of the CEO not making more than two or three times more than the guy on the floor could boost morale and increase efficiency.
Knowing that the company is doing well enough for the CEO to take out an insane salary while you see nothing of the profits can make you behave in a way that is wasteful in a "The company clearly can afford it" kind of way.
No, that is not tax evasion, I believe that you may be confused about the terminology (or are doing it on purpose for the sake of hyperbole, which is even more unhelpful). This is a case of setting up earnings to be tax advantaged (or tax avoidance), either deliberately or as an advantageous consequence of something that is potentially very good. There is a very real difference (see the article heading where it says "not to be confused with tax avoidance"). One is criminal, the other is sound money management. To put it another way, are you suggesting that you do not take any tax deductions?
-Turkey
Do you understand how taxes work? Only the first $4,900 of capital gains would be tax-free assuming no other income. The next $389,500 at 15%, and the rest at 20%. If he took a $5 million capital gain, he'd still own the top capital gain tax rate on most of it.