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?

Comments

Decent

[Andy Smith]

Just seems like a decent thing to do.

Re:Decent

[Dr_Barnowl]

Decent *and* sensible.

He might draw a much smaller salary - but as he notes, a $1M salary had low marginal value for him.

What he just did was remove all money worries from his staff. Now all their focus can go on increasing the value of his business.

Good for them, good for him. Good morals, and good sense.

Re:Decent

[Anonymous Coward]

Even if that is true and he still makes boatloads of money, raising the minimum pay of everybody in the company to $70k is still a very generous thing to have done and should still laudable.

This is assuming they don't try to weasel out of the spirit of it (e.g. only full-time employees and they only hire contractors and part-time workers afterwards).

Re:Decent

[operagost]

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.

Re:Decent

[funwithBSD]

Yeah, don't give people money, they will just misuse it...

OFFS!

Re:Decent

[ranton]

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.

Re:Decent

[RenderSeven]

According to other articles, it will cost them an average of $19k for 30 employees, so $570k. And not well publicized is he is going to spread it over 3 years. So $200k year one, $400k year 2, and so on. The $930k pay cut is immediate. The company is completely owned by the two brothers, and makes $2M in profits per year, which presumably they reinvest or take out in bonuses. The absolute WORST way to get money out of your own company is salary. I would be shocked if the tax advantages of changing disbursement methods dont outweigh the $190k first year costs, while raising profitability on paper, and making you the darling of the media and the White House (they're cozy with Obama already). If their goal was to sell the company, this would be a pretty good way to pump up the profit margin and P/E ratio before cashing out, and a little media blitz helps too.

Good for them! Gaming the system to make a buck and help their employees at the same time. But this is not sheer altruism at work.

Re:Decent

[praxis]

Well, that depends... has he also cut any bonuses he may get? How much does he already have stashed away? Is the company public, or going public? If so, how much stock does he own? Is he contemplating an entry into politics and is doing it to put a nice coat of polish on his populism creds?

By the way: For the longest time, Steve Jobs had an annual salary of $1.00 as CEO of Apple. Of course, his stock holdings in the company gave him more money annually than the GDP of many small countries, but...

Anyrate, while this is admirable and such, the sceptic in me wants to know more abut how he can afford to do that (because $70k/yr in Seattle ain't really all that much money), and why.

$70,000 not being all that much money depends on how much you expect is "all that much". I was supporting a family in Seattle with a single income of $70,000 before taxes, with want of nothing.

But, that's not what prompted me to reply.He reduced his salary to 7% of its prior amount because he felt he had enough and wanted his company to better invest that money in its other employees. He could have six billion in cash sitting in accounts all over the world, and it wouldn't change the sense of his action.

Good advertising

[Quirkz]

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.

Brilliant Marketing

[Anonymous Coward]

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.

Challenge to other CEOs

[t'mbert]

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!"

Re:Socialism!

[BasilBrush]

Capitalism allows business owners and leaders to CHOOSE to make decisions like this.

Count of business owners making such a decision under capitalism: 1

Socialism forces them to do it. Liberals don't really understand the importance of this distinction.

Oh, we understand perfectly.

Missing the Point

[mx b]

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.

Re:Rich people are taxed differently

[Lilith's Heart-shape]

In other words, the tax code is rigged to punish the working class.

Re:Socialism!

[Ryanrule]

liberals understand reality.

Incentive to Work Harder?

[srobert]

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.

Re:Long View

[American AC in Paris]

Your argument boils down to:

"if you get paid more than you're worth, you might someday find yourself in a situation where that well-paying job goes away, and you'll need to re-adjust your standard of living back down to where you 'should' be. Wouldn't it be better for you to simply keep making less money and remain at that lower standard of living in the first place? You'd avoid all kinds of uncertainty and potential upheaval!"

Compensation is whatever your employer wants to give you. If you find what this guy is doing to be grating and wrong, that says a lot more about you than it does him.

We depend on each other - like it or not

[sjbe]

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.