One chief executive slashed his salary from $1.1 million to $70,000 so he could pay employees more. Find out why the decision has been a big success.
The CEO on the cover of the latest issue of Inc. magazine makes $70,000 a year — by choice.
Dan Price, founder and chief executive of credit card processing company Gravity Payments, used to rake in about $1.1 million a year.
He opted to cut his own pay — and raid his retirement savings and mortgage two properties — so he could boost the pay of his employees and invest more in his company.
Price tells Inc.:
“Most people live paycheck to paycheck. So how come I need 10 years of living expenses set aside and you don’t? That doesn’t make any sense. Having to depend on modest pay is not a bad thing. It will help me stay focused.”
That epiphany dates back to late 2011, when an unhappy Gravity Payments employee griped to Price about struggling to live on $35,000 a year while the company kept a lid on wages after surviving the recession.
Over the following three years, Price gave out 20 percent annual raises. Earlier this year he announced that, over the next three years, he would phase in a minimum wage of $70,000 a year.
Price’s worried friends offered him a place to stay if his plan failed. One critic called him a socialist destined to fail.
But Gravity Payments has benefited from Price’s changes. Inc. reports that after the first year of 20 percent raises, productivity jumped 30 to 40 percent, and in turn profits increased as much as the prior year. Profit gains followed the second and third year of raises as well.
Still, to Price, a $70,000 minimum wage is about morals, not profits. He tells Inc.:
“I want the scorecard we have as business leaders to be not about money, but about purpose, impact and service. I want those to be the things that we judge ourselves on.”
Do you think other companies should follow Gravity Payments’ lead and institute a $70,000 minimum pay? Share your thoughts below or on Facebook.