Truthdigger of the Week: Gravity Payments CEO Dan Price
Every week the Truthdig editorial staff selects a Truthdigger of the Week, a group or person worthy of recognition for speaking truth to power, breaking the story or blowing the whistle. It is not a lifetime achievement award. Rather, we’re looking for newsmakers whose actions in a given week are worth celebrating.
We’ve all heard the figures: Chief executives of U.S. businesses take home nearly 300 times as much money as the people who toil beneath them. It’s a reality that stunts the development of many tens of millions of Americans and makes both material and emotional aspects of life harder. Thousands of workers have mobilized a struggle for a higher minimum wage, with some success. But some luckier workers — such as employees of the Seattle-based payments processing firm Gravity Payments — don’t have to.
This month, Dan Price, the 29-year-old founder of Gravity Payments, announced that he would cut his salary by roughly 90 percent from nearly $1 million to $70,000 per year and raise the salaries of his lowest-paid employees to that same level. Members of his 120-person staff were stunned. The paychecks of some 70 of them will grow over the three-year period during which the change is set to go into effect, and 30 of them will earn twice what they do now. The average annual salary at the company is $48,000.
Price said his own salary would shift back toward the $1 million mark in the years ahead in proportion to Gravity’s growing revenue. He began the company in his dorm room at Seattle Pacific University a few years after he learned he could process credit card payments more cheaply and with better service than existing large corporations.
Honorable remarks by Price on his decision were reported in The New York Times (the article included a video recording of Price making the announcement to his staff): “The market rate for me as a C.E.O. compared to a regular person is ridiculous, it’s absurd.” The Times reported that the main extravagances enjoyed by Price, who grew up in rural Idaho, are snowboarding and picking up the bar bill and that he drives a 12-year-old Audi, obtained in a barter arrangement with the local dealer.
“As much as I’m a capitalist,” he continued, “there is nothing in the market that is making me do it,” referring, The Times said, to paying his employees wages that will afford them decent housing and education for their children. He said he came to the idea after hearing his friends talk about how difficult it was to make ends meet even with incomes well above the federal minimum wage. “They were walking me through the math of making 40 grand a year,” The Times quotes him as saying. Then they’d get a surprise increase in rent or their debts would linger or grow. “I hear that every single week,” he added. “That just eats at me inside.” (More language that would be welcome from the mouths of capitalists can be heard in a promotional video that appears on Gravity’s website: “We founded Gravity on one simple principle: We really never want to make ‘screw you’ money, like the rest of the financial services industry.”)
Price’s peers in the executive class are no doubt concerned that his move will embolden the rabble in their own staffs to demand better pay and fairer treatment. An inquiry to this effect placed to Gravity Payments wasn’t returned by late last week, but the idea of giving much more to workers than is necessary to keep them alive and moderately secure is anathema to American business culture, and public responses from this quarter have confirmed that cruelty has its vocal supporters. Sandi Krakowski, an author and supposed Facebook marketing expert who describes herself in her Twitter bio as a “Thought Leader” and “Culture Creator,” wrote patronizingly on the social media site: “His mind-set will hurt everyone in the end. He’s young. He has a good intent, but wrong method.” The Times quoted Patrick R. Rogers, an associate professor of strategic management at the School of Business and Economics at North Carolina A&T State University, as writing in an email: “The sad thing is that Mr. Price probably thinks happy workers are productive workers. However, there’s just no evidence that this is true. So he’ll improve happiness, only in the short term, and will not improve productivity. Which doesn’t bode well for his long-term viability as a firm.”
Tim Kane, an economist at the conservative Hoover Institution at Stanford University, dissented. “This is going to be great for his business,” The Times quoted him as saying. “It will reduce turnover, increase morale and help him build an even greater company.” Evidence of that is already available. Three days after Price’s announcement, Gravity received more than 3,500 applications for employment and acquired several new clients.
The history of American capitalism offers precedents of executives who successfully and without pressure from markets applied the values Price has made a bid to embody — and more recently than Henry Ford, who in the early 1900s famously said that workers in his factories should make enough money to buy the cars they produce. Jim Sinegal, founder of Costco — the second-largest retailer in the United States — earned the respect, admiration and gratitude of his employees for paying them $17 an hour — 42 percent more than the store’s greatest competitor, Sam’s Club. Meanwhile, Sinegal took a salary of just $350,000. (He more than made up for this “loss” with holdings of $150 million in Costco stock, which, when The New York Times profiled Costco as an “Anti-Wal-Mart” in 2005, was handsomely outperforming that company’s.)
“I’ve been very well rewarded,” Sinegal said. “I just think that if you’re going to try to run an organization that’s very cost-conscious, then you can’t have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong.”
We at Truthdig don’t expect Fortune 500 leaders to follow Price’s suit, and some of us have our informed doubts about capitalism’s ability to provide for the welfare of workers in the long run and across the population, but we hope that Price sticks to his plan and that his example is picked up as ammunition for the view that much of the suffering borne by workers in the United States and around the world is unnecessary.
“My jaw just dropped,” said Phillip Akhavan, 29, who makes $43,000 working on Gravity’s merchant relations team, of the moment he heard the announcement. “This is going to make a difference to everyone around me.”
Dan Price is our Truthdigger of the Week.
See Price announcing the pay raise to his staff, below.