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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?
Srsly. I ain't into dudes or buttsex or penises in my mouth, but that's one fine looking man with a great big, firm, throbbing... moral compass.
Just seems like a decent thing to do.
I've seen this headline about 5 times in the last 24 hours, on a variety of media. It's certainly good for advertising, if nothing else.
The Quirkz Handbook of Self-Improvement for People Who Are Already Pretty Okay
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.
That's what's wrong with 'Murica today, too much socialism. We need to nip this kind of thinking in the bud! When will the working class realize that they only benefit when their betters are allowed to run things as they see fit, unrestricted by regulations and burdensome tax laws?
A lot of CEOs (a good example was Steve Jobs) will take token small salaries because most of their income is from their ownership in the company.
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
He surely owns a large chunk of the company: Why take a huge salary when you can motivate your employees to work harder and make the company worth more? That is a faster way to get rich than just paying yourself a salary.
He gets rich faster, and the employees are happier. It's win-win. Just don't pretend it's about "justice" and not simple self-interest.
Meh.
Sometimes the "writing on the wall" is blood spatter...
Good business practice? Silly boosterism? Enlightened self-interest?
Why not all of the above? He's generating buzz for his company, one which I've never heard of before. His employees will probably be happier, and he's probably getting stock options or something else we don't know about here, so that fits both the good business practice AND enlightened self-interest. It could turn out to be "silly boosterism" if it doesn't end up having any of those effects, but you won't know that immediately...
Taking guns away from the 99% gives the 1% 100% of the power.
Giving up 930K to go viral and generate a ton of good will toward you and your company seems like an incredibly good deal.
CEO salaries are getting ludicrous, and while his $1M is not that outrageous compared to others, it still could be translated into about 10 FTEs. Setting a minimum wage for his staff, and making sure they can all survive on what they make at their job, will translate in staff dedication that will be hard to put a price on.
I think he's also thrown the gauntlet down to other CEOs, saying: "Dare you to join me!"
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
Yes, when it means the minimum wage of his employees jumps from $34,000 to $70,000.
Once your net worth is sufficient such that you don't have to earn a salary anymore, you want to switch the majority of your earnings to income from investments.
Investment income is taxed at the capital gains rate, whereas regular income is taxed at the much higher income tax rate.
This is the simplest explanation you can read, but it's one reason why the rich keep getting richer. We've set up a welfare state for them.
The tax rate on his salary was 40% (marginal). The tax rate on his capital gains is 15%. He could even come out ahead.
If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?
I think these kinds of statements are missing the point.
The real story here is: hey, you can still make an ass-ton of money without leaving your employees as slaves!! Everyone can win and grow together, rather than a subset at the expense of the majority. (and happy employees produce more, willing to work more, etc., so the company and therefore CEO benefit even more -- it's a positive cycle).
If it's not a big deal to lose some salary because it will be made up for in investment income/dividends, then why don't more CEOs do this? I hope this guy starts a movement; even if his intentions were not entirely altruistic, it is still a good thing.
the summary stated that everyone *would* be getting a raise... indicating that perhaps many employees were not being paid fairly for the amount or types of work they were doing. Oh, and giving formerly underpaid employees fair compensation henceforth *IS* generally about the most an employer can do to provide incentive for them to work harder.
File under 'M' for 'Manic ranting'
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
This is exactly what's wrong with America. The majority is convinced convinced that our economy is broken because people aren't working hard enough. I'm convinced of the exact opposite. The reason the economy isn't working right is because people are working too hard in exchange for too little. Furthermore, we could be more productive, and more prosperous, by working more cooperatively and less competitively.
They have taken token salaries so that they do not have to pay income tax, NOT because they are heroes. "Compensated in stock" is another word for "Tax evasion"
It isn't cute, it is CEOs taking advantage of YOU directly, and looking like heroes when they do it.
The cynical side of me wonders if he still maintains stock options, etc. but that is besides the point. The point is that he did it when he didn't have to. More importantly he is raising the salaries of others at the same time that he is lowering his own. It might be symbolic to a certain extent but I'm betting that the people that got raises are not seeing it that way.
Well played Mr. Price, well played.
for maximizing employee productivity. Most of those workers won't be able to go somewhere else without taking a big pay cut. That means he can set as high of a standard for productivity has he wants, because the workers will do just about anything to keep their higher-than-market wages. I wonder if anyone will be able to make over 70k at his firm?
So here you are, a clerk or some other lower on the totem pole individual who is now making $70k. You buy a house, maybe a used car, or the reverse, either way, you increase you expenses because you can. Even frugal people would do it, it's human nature.
So now it's a few years later. The company goes under, you get laid off and you go around looking for a job that pays $70k for doing what you were doing.
None to be had.
Compensation has been commensurate to your skills for hundreds of years. It may suck for the unskilled, but that's what works. For the employer and the employee. You increase your skills, you increase your pay. Do more, get paid more. When everyone makes the same or nearly the same for vastly different levels of skill and effort, then you are headed for trouble in the long term. Just look up the Jamestown Colony and how it worked out for them.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
So what you're saying is that Biggie Smalls was giving out good financial advise? "Mo Money, Mo Problems"
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The database guy CAN unload the trucks with dinner on them.
The loading dock guy CAN'T upgrade the databases. That is why you make more money than he does.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
Capitalism allows business owners and leaders to CHOOSE to make decisions like this. Socialism forces them to do it.
Every civilized country engages in socialism. The only difference is in the degree to which they do it. A society which does not will rapidly fall apart. If you have a job it is because a lot of other people worked very hard to make it possible - even if you work for yourself. We require people pay taxes and minimum wages and other things because it benefits us all. While you can take it too far, we're certainly in no danger of that here in the US.
Liberals don't really understand the importance of this distinction.
Liberals understand that the real world isn't a place where we can afford to pretend we don't depend on each other. Share a little and everyone benefits. It is possible to both share too little and share too much. Personally I think the sharing too little is the worse of the two options.
The owner decided to do this of his own free will, regardless of what his motive was. That's the point of freedom. You're allowed to choose.
And most will choose not to of their own free will. That's the problem. If we made taxes optional, how many people do you think would pay? If we eliminated work safety rules do you think best practices would be followed? Real freedom isn't the absence of rules and obligations because society cannot function without them. Real freedom is being able to have a meaningful say in what those rules and obligations are and should be. Real freedom isn't depending on the beneficence of a single CEO deciding one day to be a nice guy.
Under socialism, your choices are far more limited. As with most forms of collectivism, either things are mandatory or they're prohibited.
Tell you what. Take a trip to Europe sometime. The EU is by many measures the largest economy in the world. The standard of living in most of the EU is quite high compared to much of the rest of the world. Most governments in the EU have what is generally acknowledged to be a somewhat socialist ideology - certainly in comparison to the USA. And yet they have good health care, good GDP per-capita, world class businesses and manufacturing and art and sport, and are among the most successful societies on the globe politically, economically, militarily and socially. All while "socializing" certain aspects of their society and what do you know, it works if you don't take it to the extreme of communism.
Here's the point of all that. We ALL depend on each other. You can argue about how much sharing is a good thing but you cannot argue that all sharing can be optional. It simply will not work. Some folks simply are more willing to acknowledge this fact than others. You can argue about how much sharing is a net benefit to society but the argument Socialism = Bad is just stupid. EVERY society has some amount of socialism to it and it cannot be otherwise.
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
I'm not saying this is a bad move, but it may not be a purely good move for the employees.
-- Slashdot, making the Left look conservative since 1997.
In the meantime another CEO is paying himself a record salary for cutting his stock's value in half...
Seven puppies were harmed during the making of this post.
Moves like this aren't philanthropic. It's a common tactic for a vested CEO to cut their salary to just $1. But because they are vested (EG: stock options, partial ownership, etc) they make out just fine.
As a company owner, I could cut my salary to just $1 and it probably wouldn't affect my true annual gross income at all, since unpaid salary just becomes profit.
I have no problem with your religion until you decide it's reason to deprive others of the truth.
Right, every poor person is poor due to back luck, not personal decisions and life choices. You know, just like everyone in prison is innocent. Just ask them. Poor people being poor because they got sued by someone or got screwed by their medical insurance company or because they were in a coma for a year is the exception to the rule. The vast majority of unsuccessful people career-wise are that way because they didn't do what they needed to do to get a better job.
There are a lot of CEOs who make $1 per year to pay less in income tax, and rake in hundreds of millions in stock comp. Also, $70K is barely adequate in Seattle.