Pearls of wisdom. Not the economics–because it is absurd, the reality not of “free market” competition but the reality of cronyism, corruption and greed. But, Dan Price saw the immorality of paying people shit and did something about it: he cut his pay and is raising everyone’s wages.
A caveat: I am naturally hesitant to put anyone on a pedestal too quickly, especially someone who gets some uncritical free media without too much inquiry. But, until I see otherwise, Price gets a free ride and a tip of the cap for this:
The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.
“Is anyone else freaking out right now?” Mr. Price asked after the clapping and whooping died down into a few moments of stunned silence. “I’m kind of freaking out.”
If it’s a publicity stunt, it’s a costly one. Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.
The paychecks of about 70 employees will grow, with 30 ultimately doubling their salaries, according to Ryan Pirkle, a company spokesman. The average salary at Gravity is $48,000 year.[emphasis added]
What he came to understand:
“The market rate for me as a C.E.O. compared to a regular person is ridiculous, it’s absurd,” said Mr. Price, who said his main extravagances were snowboarding and picking up the bar bill. He drives a 12-year-old Audi, which he received in a barter for service from the local dealer.[emphasis added]
The reaction from his workers:
Hayley Vogt, a 24-year-old communications coordinator at Gravity who earns $45,000, said, “I’m completely blown away right now.” She said she has worried about covering rent increases and a recent emergency room bill.
Phillip Akhavan, 29, earns $43,000 working on the company’s merchant relations team. “My jaw just dropped,” he said. “This is going to make a difference to everyone around me.”
A note: to be sure, Price is going to still be a very wealthy man–he has a company which is still making a lot of money.But…he did this. And as far as I can tell it comes from an honest place, an honest morality.
The fact that this even gets some buzz is a sign of how corrupt CEOs truly are, grabbing millions of dollars for themselves and leaving most of their workers to pick up crumbs. The only slight disagreement I’d have with Price is on his view of the “market” for CEO pay.
There is no “market” in the sense that normal people would understand. It’s a corrupt, closed system of cronyism. I’ve written about this many times over the years and had the good fortune, when writing my book“The Audacity of Greed” back in 2009, to talk with Graef “Bud” Crystal who was once one of the country’s premier compensation consultants—the guy who would be hired by CEOs to come up with compensation packages. He told me back then:
“In 1970, one CEO hired me and said, ‘we don’t have a bonus plan and do we need one?’” recalls Crystal. “I did the study and I went back to the CEO and said ‘yes you do need a bonus plan. But we have a problem area. You are making $150,000-a year and the problem is that the $150,000 is equal to the salary and the bonus to what your competitors are paying so we have to cut your pay to $100,000-a-year and then we can put in a bonus.’” Crystal laughs. “It was like a scene from The Exorcist where ice formed on the windows…he started arguing about the findings and he finally said ‘let me say this to you this way: who do you think is paying your bills anyway?’ I replied, ‘If I recall correctly the checks were drawn on the corporate account, not your personal account so the shareholders are paying me, not you.’ The meeting ended quite quickly.
The point is the whole game is fixed. The CEO stacks his board with cronies, pays them $20,000-per-meeting board fees and, then, makes sure his cronies approve pay packages though the real money is in the pensions and deferred pay. It’s a scam.It is interesting that Price’s decision comes on the eve what will be huge national demonstrations to raise wages to a minimum of $15-an-hour.
This article originally appeared in workinglife.org on April 14, 2015. Reprinted with permission.
About the author: Jonathan Tasini on any given day, I think like a political-union organizer or a writer — or both. I’ve done the traditional press routine including The Wall Street Journal, CNBC, Business Week, Playboy Magazine, The Washington Post, The New York Times and The Los Angeles Times. One day, back when blogs were just starting out, I created Working Life. I used to write every day but sometimes there just isn’t something new to say so I cut back to weekdays, with an occasional weekend post when it moves me. I’ve also written four books: It’s Not Raining, We’re Being Peed On: The Scam of the Deficit Crisis (2010 and, then, the updated 2nd edition in 2013); The Audacity of Greed: Free Markets, Corporate Thieves and The Looting of America (2009); They Get Cake, We Eat Crumbs: The Real Story Behind Today’s Unfair Economy, an average reader’s guide to the economy (1997); and The Edifice Complex: Rebuilding the American Labor Movement to Face the Global Economy, a critique and prescriptive analysis of the labor movement (1995).