The CEO who cut his pay to give his staff a £50,000 minimum wage
A challenging story from the USA about Dan Price, the CEO of Seattle-based Gravity Payments who earned $1.1M pa (£750,000) and decided to reduce it so that all workers in the company could earn a minimum salary of $70,000pa (£50,000).
Dan Price, who is a Christian, was challenged in 2012 by a low paid member of staff about the fairness of a salary which did not enable him to have a decent life while the CEO had more than enough. This caused Dan to reflect and research. A 2010 paper by academics Daniel Kahneman and Angus Deaton looking at wellbeing and happiness made the argument that emotional wellbeing rises with income up to a cut-off point of $75,000 (£50,000 in the UK) – beyond which people do not get any happier as they get richer.
Over the three years following that challenge, Dan handed out 20% annual pay increases. To his surprise, profit growth continued to substantially outpace wage growth. Then in April 2015 he made a dramatic announcement to his 120-member staff that he would phase in a minimum wage of $70,000 at Gravity and immediately cut his own salary from $1.1 million to $70,000 to help fund it.
He also invited NBC News and The New York Times to cover it. The reaction was huge. NBC's video became the most watched in network history. There were over 500M interactions on social media. Workers from other companies reported pay rises from sympathetic bosses. Thousands applied to join the company. New customer enquiries have gone through the roof. A nerve in the nation had been struck - executive rewards had been outstripping workers wage growth for many years.
It's an experiment but Dan is determined to pursue it. "Having to depend on modest pay is not a bad thing. It will help me stay focused. I just decided I'm gonna do $70,000. I don't care if I have to stop paying myself or I have to work 20 hours a day. I'm going to do it."
To Dan, establishing a $70,000 minimum wage is a moral imperative, not a business strategy. It's not about money, but about purpose, impact, and service.
The above was from 2016. What has happened since?
In Feb 2020, the BBC published an article which reported that Gravity has transformed. The headcount has doubled and the value of payments that the company processes has gone from $3.8bn a year to $10.2bn. There were between zero and two babies born per year amongst the team but since the announcement - and it's been only about four-and-a-half years - they've had more than 40 babies. More than 10% of the company have been able to buy their own home, in one of the US's most expensive cities for renters. Before the figure was less than 1%. The amount of money that employees are voluntarily putting into their own pension funds has more than doubled and 70% of employees say they've paid off debt.
It takes courage to break ranks such as Dan has done at Gravity Payments. If you are a business owner, what can you do?
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Geoff Knott, 12/07/2016