Last spring, when I read about Gravity Payments, I was intrigued by the decision of Dan Price, their CEO, to set the minimum salary at his company at $70K.
It seemed like a decent enough idea – if you didn’t think about it for all that long.
Here’s the thing: without getting into the “if you cost too much we’ll replace you with a robot” argument, there is a certain amount, plus or minus a few K, that a certain job is worth. If a company pays much below that certain amount, they’ll probably not attract and retain good people. If a company pays much above that certain amount, they’re not making good business sense – over-paying is seldom worth it.
So I get why companies institute salary bands. If you reach the upper limit of your band, without taking on additional responsibility, you’re not going to get merit raises. You’ll just get cost of living increases when the band is adjusted.
That I get.
Different companies also have philosophies about whether they peg their salary levels at market, below market, or above market.
There’s an argument for each approach, but if you choose to pay below market, you better be prepared to a) offer plenty of bennies, financial or otherwise, or b) live with a below market workforce.
Anyway, when it comes to setting salary levels, there’s a lot to think about.
But when Gravity lifted the bottom employees up to the $70K level, I did ask myself how I’d feel if I’d had a “real” $70K job and someone with a job that required less education, knowledge, effort, experience, whatever, all of a sudden made the same amount I did. Hmmm. Unless my salary were also increased, I’d probably be a bit miffed.
But, in raising the salary floor at Gravity (and lowering his own $1.1M comp ceiling), Price felt he was on to something:
The idea came to him, he’d later tell the media, after talking to a friend who earned less than he did. He’d read about a study showing that extra income improves the happiness of people who earn less than about $75,000. “It’s not about making money; it’s about making a difference,” Price told the Today Show, one of two dozen TV interviews he did in the days following the announcement. (Source, quoted material and other information, article by Karen Weise on Bloomberg.)
No surprise that Price’s decision grabbed so many headlines, what with all the talk about income inequality. (Among the headlines: Rush Limbaugh branded Price a socialist.)
Over time, Gravity experienced a few negatives:
Job applicants had overwhelmed his company, and two employees quit, saying the increase wasn’t fair to higher earners.
Then the story goes way beyond the $70K salary floor.
For one thing, there’s the lawsuit.
“Potentially the worst blow of all,” the Times wrote, was that about two weeks after the announcement, Price was sued by his older brother Lucas, who owns about 30 percent of Gravity, alleging Price paid himself too much in the first place.
Price hinted that “his brother may have sued in reaction to the generous pay increase,” but the suit was initiated before the everyone-a-winner plan was announced. And, objectively speaking, it does appear that Price was overpaid, relative to other chief execs in companies of similar size or revenue.
It’s also possible that Price increased employee salary in reaction to the lawsuit, to show his brother up.
Then there’s the speculation that Price’s strategy was less about noblesse oblige than it was about self-branding. After all, he now has a hefty book deal, all sorts of TV and speaking appearances, magazine covers. So much publicity and ego-stroking that it’s been contended that:
…he’s solidifying his place as the next do-gooder businessman, joining the CEOs of bigger companies, such as Zappos’s Tony Hsieh and Whole Foods Market’s John Mackey. In the process, he’s surely become the only credit card processing executive to be feted by Esquire, courted by literary agents, and swooned at by women on social media who declared him “yum”
(Yes: Price is good-looking.)
Price even turned Russell Brand into a fan boy, joking in a YouTube video that, “It’s difficult to ignore the fact that Dan Price looks a lot like Jesus.”
Apparently, having Russell Brand carrying your water may be too, too, much. Price has said:
“I’m just so sick of attention ... It just feels like a lot of investment of yourself.”
If Price is indeed sick about all the attention, he’s due to become even sicker. His ex-wife gave a talk in October – now scheduled to be posted online by TEDx – in which she claims that she was body-slammed and waterboarded by Price. (Price denies that this happened.)
It will be interesting to see how Price weathers all this.
Wonder if he’s still happy with his decision to pay all his employees something closer to the happiness salary.
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