Best boss in the world? CEO takes 90pc pay cut to raise firm's minimum wage to €66k
Published 15/04/2015 | 09:52
The boss of a technology start-up in Seattle shocked his employees by announcing he was taking a massive pay cut in order to raise the salaries of the firm's lowest-paid staff.
Dan Price, founder and CEO of credit card payment processing company Gravity Payments, decided to introduce a new minimum wage of $70,000 (€66,000) while reducing his own by 90pc.
Mr Price, 30, told staff in a weekly meeting that he would be cutting his $1m salary to $70,000 too, as well as eating into the company’s profits to pay the extra money.
“You might be making $35,000 a year right now but everyone in here will definitely be making $70,000 a year and I'm super excited about that," said Mr Price, who started the firm from his bedroom as a teenager in 2004.
The national minimum wage in the US is around $7 an hour, which equates to $17,000 in gross annual income.
According to research, the CEOs of Standard & Poor 500 companies made 354 times the average wages of US workers in 2012.
Mr Price, whose company handled $6.5billion in transactions last year, decided to raise his employees' pay after reading a study about happiness in the workplace.
The research, conducted by Nobel Prize-winning economist Angus Deaton and psychologist Daniel Kahneman, found that what they called emotional well-being rises with income, but only to a point. And that point turns out to be about $75,000 a year.
“The market rate for me as a CEO compared to a regular person is ridiculous, it’s absurd,” Mr Price said, adding that he did not think it was right that he should earn up to 100 times more than most of the rest of his staff.
"My salary wasn't $1 million because I need that much to live, but that's what it would cost to replace me as a CEO," Mr Price told ABC News. "I think CEO pay is way out of whack. It ended up impacting me, because I want the company to be sustainable even if something happens to me. Temporarily, I’m going down to the minimum until the company gets back to where it was."
"I may have to scale back a little bit, but nothing I’m not willing to do. I’m single. I just have a dog," Mr Price said.
The company, which pays an average salary of $48,000, has 120 employees - and 70 of their pay cheques will grow with this plan. Of those, 30 will double their salaries.
All 120 were stunned into silence when they were told the news, but quickly broke into applause, according to Philip Akhavan, a merchants relations worker whose $43,000 salary immediately jumped 16 per cent to $50,000.
"It took us a moment to understand what he was saying," said Mr Akhavan, who called his wife, who did not believe him.
Mr Price, who owns a three-bedroom house and drives a 12-year-old Audi, said his friends include the super-rich, who invite him on their private planes and expensive yachts.
"I have an incredibly luxurious life, for some reason, but I don’t end up paying for a lot of it," he said. "I’m a big believer in less: The more you have, sometimes the more complicated your life gets," he said.