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Troubled Times for CEO Who Raised Minimum Employee Pay to $70K

 

Troubled Times for CEO Who Raised Minimum Employee Pay to $70K

By Burt Carey

 

Well, it sounded good in theory…

In April Gravity Payments CEO Dan Price announced to great fanfare that minimum wage at his company would be $70,000 per year. The Seattle entrepreneur said that many of his employees simply couldn’t live on sub-$40,000 salaries, so he gave them a raise. And he paid for it by slicing his $1 million a year salary.

5601194718_d2152444c5_oIt sounded like a tale straight out of an Ayn Rand novel. What has happened in the ensuing months has played out just like Atlas Shrugged.

First, two of Gravity’s biggest clients bolted, fearing the credit card payment company was making a political statement and that it would raise rates to pay for the new wage scale.

Price’s brother, Lucas, who owns a 30 percent stake in the company, has sued.

Two of Gravity’s top performers are among a host of employees who have left the company, complaining that new employees are now making just as much as seasoned veterans and that their own efforts were no longer being rewarded financially. One of them told the New York Times: “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”

And now Price is having to rent out his home because of financial hard times.

On the upside, other customers have come on board. Profits from those transactions, however, won’t be realized for at least another year.

The story of Price taking on the pay inequality issue with such a bold move made headlines all across the country this past spring. Few media outlets have reported on the quick turn-around in Gravity’s fate. It seems that Price’s attempt at altruism isn’t as sexy as it was just four months ago.

Web developer Grant Moran, who quit working at Gravity, told Inc. magazine, “Now the people who were just clocking in and out were making the same as me. It shackles high performers to less motivated team members.”

All of which brings us back to Ayn Rand, the Russian-born novelist and philosopher who lived through the Kerensky and Bolshevik revolutions and used those experiences to create characters who played out the socialist/capitalist belief systems to their logical conclusions. “The basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value,” she wrote. “The issue is whether the need of others is the first mortgage on your life and the moral purpose of your existence.”

Rand succinctly understood something innately interesting about the human psyche that was portrayed by the character John Galt in Atlas Shrugged. An engineer with a rail company, he quit and vowed to stop the “motor of the world” because the heirs who assumed control of his company had adopted a plan for all workers that read: “From each according to his ability, to each according to his need,” which ultimately resulted in high performers being passed over in favor of employees whose needs were deemed more important.

For his part and struggles aside, Price isn’t backing away from his plan.

 

 

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Photo Credit: Tomi Tapio K

 

Source:  Sportsmans Lifestyle

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