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Businesses The Almighty Buck

Seattle CEO Cuts $1 Million Salary To $70K, Raises Employee Salaries 482

First time accepted submitter fluffernutter writes Dan Price started his company, Gravity Payments, out of university when he was 19. Now he is cutting his $1 million salary to $70,000 and promising to raise all his employees' salaries. Dan is quoted as saying he made the move because "I think this is just what everyone deserves."Good business practice? Silly boosterism? Enlightened self-interest?
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Seattle CEO Cuts $1 Million Salary To $70K, Raises Employee Salaries

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  • by Anonymous Coward on Thursday April 16, 2015 @09:14AM (#49485157)
    Srsly. I ain't into dudes or buttsex or penises in my mouth, but that's one fine looking man with a great big, firm, throbbing... moral compass.
  • Decent (Score:5, Interesting)

    by Andy Smith ( 55346 ) on Thursday April 16, 2015 @09:15AM (#49485161)

    Just seems like a decent thing to do.

    • Re:Decent (Score:5, Insightful)

      by Dr_Barnowl ( 709838 ) on Thursday April 16, 2015 @09:17AM (#49485197)

      Decent *and* sensible.

      He might draw a much smaller salary - but as he notes, a $1M salary had low marginal value for him.

      What he just did was remove all money worries from his staff. Now all their focus can go on increasing the value of his business.

      Good for them, good for him. Good morals, and good sense.

      • Re: (Score:3, Insightful)

        by mysidia ( 191772 )

        What he just did was remove all money worries from his staff.

        Not necessarily. When people earn more money, they tend to spend more less efficiently or for things they want more than need. If they have poor discipline, now they are eligible for more credit and can rack up bigger debts faster.

        Often people spend more money than they should, Or they have a "spending disorder", such as Shopping Addiction OR Binge + Buyer's Remorse, and it ultimately results in money worries.

        In other words: money wo

        • If they have poor discipline, now they are eligible for more credit and can rack up bigger debts faster.

          This is definitely true. I had a relative who spent several years working in the oil fields after dropping out of college. He easily was making enough money in one year to completely pay off all his student loans and other debts that he had racked up.

          During the recent downturn he was laid off and was more in debt after several years of hauling in six figures than he was when he first started working out there. You tend to see the same thing with lottery winners as well where they can suddenly have millio

          • I hope he has recovered; I was listening to the radio one time and this is the reason athletes who just turned pro in the NFL usually are staffed with a financial advisor to work out the mess a sudden windfall that 6 figures creates.

        • Re:Decent (Score:5, Insightful)

          by funwithBSD ( 245349 ) on Thursday April 16, 2015 @09:37AM (#49485433)

          Yeah, don't give people money, they will just misuse it...

          OFFS!

          • He seems like one of the rare people/leaders who can say, I have enough, I want others to have enough as well. bravo.

        • Re: Decent (Score:4, Insightful)

          by D.McG. ( 3986101 ) on Thursday April 16, 2015 @10:16AM (#49485793)
          Could not disagree more. With a newborn, child daycare will cost me $1515 per month. An increase in my salary will help me be in the office 5 days a week vs. working from home, pretending to work while tending to the newborn. Being able to afford child care will be a huge boost in productivity for the company. A very smart move on his part.
          • by mysidia ( 191772 )

            With a newborn, child daycare will cost me $1515 per month. An increase in my salary will help me be in the office 5 days a week vs. working from home

            Your story is anecdotal and does not apply to the population in general. Your story also does not contradict my proposition.

            There are intelligent or beneficial uses of additional $$$ and bad ones. There is well-planned budgeted constrained spending, and impulsive spending.

            You chose to not spend money on childcare before, and work from home which can be car

          • Re: Decent (Score:5, Funny)

            by bugs2squash ( 1132591 ) on Thursday April 16, 2015 @12:17PM (#49487007)

            Why pay $1515 per month ?

            When with new Amazon Babycare your infant child (maximum 20 pounds and 30" x 10" x 10") will be picked up by drone on Sunday night and returned on Friday evening each week for a mere $1000 per baby per month. Baby warehouse specialists will tend to your child's every need and facilitate full access to kindle baby entertainment and eLearning.

            Prime discounts available.

        • Re:Decent (Score:4, Insightful)

          by kilfarsnar ( 561956 ) on Thursday April 16, 2015 @10:37AM (#49485979)

          What he just did was remove all money worries from his staff.

          Not necessarily. When people earn more money, they tend to spend more less efficiently or for things they want more than need. If they have poor discipline, now they are eligible for more credit and can rack up bigger debts faster.

          Often people spend more money than they should, Or they have a "spending disorder", such as Shopping Addiction OR Binge + Buyer's Remorse, and it ultimately results in money worries.

          In other words: money worries are not exclusively caused by low salaries. Money worries can be caused by insufficient education/poor resource management, and psychological problems as well.

          Our modern economy is based on this dynamic. We would not be able to sustain economic growth if people just bought what they need and maybe a little extra. Because of the way our monetary and economic systems are set up, they require constant growth or the music stops.

          I would also add that people are constantly inundated with advertizing. That advertizing often seeks to make the subject feel inadequate in some way and offers the solution by way of the product being advertized. People have studied how to make people react in a certain way and what triggers their responses. Basically it is those people's job to figure out what makes you tick and use that knowledge to manipulate you. So I can't be too hard on people who make seemingly foolish decisions with their money. We are so immersed in advertizing and PR it's hard to even see it happening. The psychological pressure is immense and is designed to be hard to resist.

        • by in10se ( 472253 )

          So what you're saying is that Biggie Smalls was giving out good financial advise? "Mo Money, Mo Problems"

      • What he just did was remove all money worries from his staff. Now all their focus can go on increasing the value of his business.

        Hopefully, but in most cases, bills tend to rise to meet available cash for some reason. Often when household incomes hit the $70K-$140K range depending on location, household money management starts to get strategic instead of purely tactical and things change.

      • I think this has been tried before [blogspot.com]

      • What he just did was remove all money worries from his staff.

        But he could have used that money to hire more people instead, and expand the business. The result would have been broader income equality, more goods and services produced, and more revenue for the company that could then be used to pay even more people. He would have done more good if he had been greedy.

    • Moves like this aren't philanthropic. It's a common tactic for a vested CEO to cut their salary to just $1. But because they are vested (EG: stock options, partial ownership, etc) they make out just fine.

      As a company owner, I could cut my salary to just $1 and it probably wouldn't affect my true annual gross income at all, since unpaid salary just becomes profit.

  • Good advertising (Score:5, Insightful)

    by Quirkz ( 1206400 ) <ross @ q u irkz.com> on Thursday April 16, 2015 @09:16AM (#49485177) Homepage

    I've seen this headline about 5 times in the last 24 hours, on a variety of media. It's certainly good for advertising, if nothing else.

  • Brilliant Marketing (Score:5, Informative)

    by Anonymous Coward on Thursday April 16, 2015 @09:16AM (#49485179)

    If you dig through more articles it states that he'll be paid $70k a year until his business starts making above a certain amount again.

    So far I've seen this guy on Facebook, the Today show, Reddit and now Slashdot. It's making its rounds and is a great PR move.

  • Socialism! (Score:5, Funny)

    by Jawnn ( 445279 ) on Thursday April 16, 2015 @09:16AM (#49485187)
    That's what's wrong with 'Murica today, too much socialism. We need to nip this kind of thinking in the bud! When will the working class realize that they only benefit when their betters are allowed to run things as they see fit, unrestricted by regulations and burdensome tax laws?
    • That's what's wrong with 'Murica today, too much socialism. We need to nip this kind of thinking in the bud! When will the working class realize that they only benefit when their betters are allowed to run things as they see fit, unrestricted by regulations and burdensome tax laws?

      I realize you're trolling, but there's nothing about capitalism that prohibits benevolence. This seems to be a very confusing point for many people.

      The owner decided to do this of his own free will, regardless of what his motive was. That's the point of freedom. You're allowed to choose. Under socialism, your choices are far more limited. As with most forms of collectivism, either things are mandatory or they're prohibited.

      • by mpp ( 18866 )

        The owner decided to do this of his own free will, regardless of what his motive was. That's the point of freedom. You're allowed to choose. Under socialism, your choices are far more limited. As with most forms of collectivism, either things are mandatory or they're prohibited.

        Under capitalism, the people with the money have LOTS of choices. The vast majority of us, not so many choices.

      • by sjbe ( 173966 ) on Thursday April 16, 2015 @11:42AM (#49486629)

        The owner decided to do this of his own free will, regardless of what his motive was. That's the point of freedom. You're allowed to choose.

        And most will choose not to of their own free will. That's the problem. If we made taxes optional, how many people do you think would pay? If we eliminated work safety rules do you think best practices would be followed? Real freedom isn't the absence of rules and obligations because society cannot function without them. Real freedom is being able to have a meaningful say in what those rules and obligations are and should be. Real freedom isn't depending on the beneficence of a single CEO deciding one day to be a nice guy.

        Under socialism, your choices are far more limited. As with most forms of collectivism, either things are mandatory or they're prohibited.

        Tell you what. Take a trip to Europe sometime. The EU is by many measures the largest economy in the world. The standard of living in most of the EU is quite high compared to much of the rest of the world. Most governments in the EU have what is generally acknowledged to be a somewhat socialist ideology - certainly in comparison to the USA. And yet they have good health care, good GDP per-capita, world class businesses and manufacturing and art and sport, and are among the most successful societies on the globe politically, economically, militarily and socially. All while "socializing" certain aspects of their society and what do you know, it works if you don't take it to the extreme of communism.

        Here's the point of all that. We ALL depend on each other. You can argue about how much sharing is a good thing but you cannot argue that all sharing can be optional. It simply will not work. Some folks simply are more willing to acknowledge this fact than others. You can argue about how much sharing is a net benefit to society but the argument Socialism = Bad is just stupid. EVERY society has some amount of socialism to it and it cannot be otherwise.

    • I don't even understand your comment. It's not even funny. A capitalist decided, on his own, without government interference, to increase pay.
  • by ZorinLynx ( 31751 ) on Thursday April 16, 2015 @09:16AM (#49485193) Homepage

    A lot of CEOs (a good example was Steve Jobs) will take token small salaries because most of their income is from their ownership in the company.

    If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?

      Yes, when it means the minimum wage of his employees jumps from $34,000 to $70,000.

    • by snsh ( 968808 )

      The tax rate on his salary was 40% (marginal). The tax rate on his capital gains is 15%. He could even come out ahead.

    • Missing the Point (Score:5, Insightful)

      by mx+b ( 2078162 ) on Thursday April 16, 2015 @09:29AM (#49485335)

      If he's pulling down $5 million a year from company stock dividends, is giving up a $1 million salary that big a deal?

      I think these kinds of statements are missing the point.

      The real story here is: hey, you can still make an ass-ton of money without leaving your employees as slaves!! Everyone can win and grow together, rather than a subset at the expense of the majority. (and happy employees produce more, willing to work more, etc., so the company and therefore CEO benefit even more -- it's a positive cycle).

      If it's not a big deal to lose some salary because it will be made up for in investment income/dividends, then why don't more CEOs do this? I hope this guy starts a movement; even if his intentions were not entirely altruistic, it is still a good thing.

      • If it's not a big deal to lose some salary because it will be made up for in investment income/dividends, then why don't more CEOs do this?

        Because:
        A: their souls are dried up.
        B: their souls are sold to the Devil.
        C: They never had a soul in the first place.

    • by ranton ( 36917 ) on Thursday April 16, 2015 @09:41AM (#49485469)

      The company was making $2.2 million in profits, and 75-80% of that is also going into this wage increase. So he is significantly lowering his total compensation by a drastic amount (probably around 20% of his previous compensation).

    • What you should do is stop focusing on whether the dude is indeed negatively affected by this or not, and switch to whether the people who work for him are positively affected or not. They ARE positively affected and that's all that matters.
      I don't care if it's a PR stunt or calculated move, I care whether the employees of that company are happier. If they are, all's peachy.

    • Re: (Score:3, Interesting)

      by netsavior ( 627338 )
      They have taken token salaries so that they do not have to pay income tax, NOT because they are heroes. "Compensated in stock" is another word for "Tax evasion"

      It isn't cute, it is CEOs taking advantage of YOU directly, and looking like heroes when they do it.
      • by j-turkey ( 187775 ) on Thursday April 16, 2015 @12:07PM (#49486913) Homepage
        No, that is not tax evasion, I believe that you may be confused about the terminology (or are doing it on purpose for the sake of hyperbole, which is even more unhelpful). This is a case of setting up earnings to be tax advantaged (or tax avoidance), either deliberately or as an advantageous consequence of something that is potentially very good. There is a very real difference [wikipedia.org] (see the article heading where it says "not to be confused with tax avoidance"). One is criminal, the other is sound money management. To put it another way, are you suggesting that you do not take any tax deductions?
    • In general I applaud this sort of restraint, but I hope it is the full story. As anyone who has contracted knows, you are a knob to accept a salary if you can avoid it. Having the money come out in dividends, capital gains or trust/company income basically takes you from a punitive tax regime into one where you can manage tax in remarkably creative ways.

      For example if you want to run a race car, you can quite happily claim back the costs of racing as an advertising expense so long as you put a logo on your

  • So what? (Score:5, Interesting)

    by johnnys ( 592333 ) on Thursday April 16, 2015 @09:17AM (#49485199)

    He surely owns a large chunk of the company: Why take a huge salary when you can motivate your employees to work harder and make the company worth more? That is a faster way to get rich than just paying yourself a salary.

    He gets rich faster, and the employees are happier. It's win-win. Just don't pretend it's about "justice" and not simple self-interest.

    Meh.

    • by hodet ( 620484 )

      That's one way to look at it I guess. He could just have easily boosted his salary and cut staff. He didn't do that. Let's hear from the employees before we make judgment. Sure there is a good dose of PR in there, but if staff are getting raises and he is motivating them that will improve the company, and that is good business.

    • by bondsbw ( 888959 )

      Actually I fail to see how "motivate your employees to work harder" necessarily translates into "employees are happier". In many companies the two concepts are inversely correlated.

      I prefer it when leadership gets paid in company stock. When the company does well, they get a reward. If the company performs poorly, they take a hit. When CEOs get a guaranteed salary with a nice severance agreement, that gives them less incentive to perform in the best interest of the company.

      • Re:So what? (Score:5, Insightful)

        by war4peace ( 1628283 ) on Thursday April 16, 2015 @09:52AM (#49485581)

        I prefer it when leadership gets paid in company stock.

        That's exactly why most companies' leadership only thinks ahead until the next fiscal quarter end.

      • by johnnys ( 592333 )

        "Actually I fail to see how "motivate your employees to work harder" necessarily translates into "employees are happier""

        Fair criticism. I just think that for people with common sense, more money likely (not necessarily!) translates into a better life and more satisfaction, up to a point.

        A larger apartment closer to work for a more relaxing commute, fewer nagging worries about money, chances to enjoy nicer "things", etc. are all minor but real improvements in quality of life that can be enjoyed with a

  • Missing option (Score:5, Insightful)

    by XxtraLarGe ( 551297 ) on Thursday April 16, 2015 @09:17AM (#49485209) Journal

    Good business practice? Silly boosterism? Enlightened self-interest?

    Why not all of the above? He's generating buzz for his company, one which I've never heard of before. His employees will probably be happier, and he's probably getting stock options or something else we don't know about here, so that fits both the good business practice AND enlightened self-interest. It could turn out to be "silly boosterism" if it doesn't end up having any of those effects, but you won't know that immediately...

    • This is not just a good thing for Gravity's employees, it is also an enormously thought-provoking action at a time when such actions are rare.

      Even imagining that high tech is a true meritocracy, which is a fairly dubious imagining, American companies are still floating in the sea of American business. And America has been heading towards historic levels of income inequality, higher than the levels that preceded the great depression. We tend not to learn our lessons until we shoot ourselves in the foot or

  • From the article:

    While a campaign is underway in B.C. to raise the minimum wage to 15 dollars, a Seattle company is going to pay its employees at least $70,000 a year.

    Basically everyone (even the janitors) will make 70k. I'm sure the CEO will have stock and options in the company to make far more than 70k but his "official" earnings is the same.

    • by rhazz ( 2853871 )

      Basically everyone (even the janitors) will make 70k

      I know this is pedantic but... do any companies actually employ janitors rather than contracting it to a cleaning company?

  • Worth it. (Score:4, Insightful)

    by chris200x9 ( 2591231 ) on Thursday April 16, 2015 @09:19AM (#49485223)
    Giving up 930K to go viral and generate a ton of good will toward you and your company seems like an incredibly good deal.
    • A good deal in the first year, but it's an ongoing expense. Now $70k will get you a shit-ton of options to choose from for lower level job hiring, but anyone looking to hire in at a higher salary is going to know that there isn't as much headroom in the budget for the overall salary cap. It may work; it will certainly gain him at least a huge short-term morale boost (unless you were already making 63-69k, in which case, not so much) in addition to the press.

      Its still a nice gesture, even if it's a calculate

      • by jdunn14 ( 455930 )

        I didn't see anything where it said the maximum salary would be $70k, just that the CEO was dropping his own to $70k. I've known a few businesses where a particularly valuable employee made more than the CEO/owner since the CEO/owner made money off stock or was already wealthy enough that the salary just didn't mean much to their overall numbers.

  • by t'mbert ( 301531 ) on Thursday April 16, 2015 @09:19AM (#49485237)

    CEO salaries are getting ludicrous, and while his $1M is not that outrageous compared to others, it still could be translated into about 10 FTEs. Setting a minimum wage for his staff, and making sure they can all survive on what they make at their job, will translate in staff dedication that will be hard to put a price on.

    I think he's also thrown the gauntlet down to other CEOs, saying: "Dare you to join me!"

  • This isn't hard to do -- it simply means that the company will eliminate all jobs making less than $70k and supplement with contracted individuals and companies. It's easy to say that you would pay janitors $70k a year if you don't actually employ any janitors (and wouldn't employ any janitors because you don't want to pay $70k for them).

  • Once your net worth is sufficient such that you don't have to earn a salary anymore, you want to switch the majority of your earnings to income from investments.

    Investment income is taxed at the capital gains rate, whereas regular income is taxed at the much higher income tax rate.

    This is the simplest explanation you can read, but it's one reason why the rich keep getting richer. We've set up a welfare state for them.

    • by Lilith's Heart-shape ( 1224784 ) on Thursday April 16, 2015 @09:33AM (#49485379) Homepage
      In other words, the tax code is rigged to punish the working class.
    • It's much much worse than that. If you're slightly above middle class wealthy (more than a few million) you don't pay any tax, and if you're completely immoral you can even put yourself into an income position where you, your spouse or children are getting handouts from the state (e.g. education grants, child tax credits). I'm serious look into it a bit.

      http://www.accounting-degree.org/accounting-tricks/

      I can't find the link now but the investment banks have a great scheme where they essentially loan you mo

  • Let's suppose Wal-mart started a floor at something reasonable, say 20$ an hour. This would attract a much better class of employee and in turn customers. They wouldn't spend nearly as much on shrinkage and retention as they do now... I think it would transform the entire company.

    • Let's suppose Wal-mart started a floor at something reasonable, say 20$ an hour. This would attract a much better class of employee and in turn customers. They wouldn't spend nearly as much on shrinkage and retention as they do now... I think it would transform the entire company.

      I'd think Wal-Mart has considered all this and compensates their employees to maximize their return. I trust their judgment over yours..

  • What a lot of people don't realize is that top brass gets compensation that's often not in their salary e.g. stock options. Salaries are taxed at the ordinary income rate. Bonuses and options are not. More than likely this was a weasel move to garner public support while secretly loving the fact that his tax burden has been significantly lowered.

  • by erp_consultant ( 2614861 ) on Thursday April 16, 2015 @10:14AM (#49485779)

    The cynical side of me wonders if he still maintains stock options, etc. but that is besides the point. The point is that he did it when he didn't have to. More importantly he is raising the salaries of others at the same time that he is lowering his own. It might be symbolic to a certain extent but I'm betting that the people that got raises are not seeing it that way.

    Well played Mr. Price, well played.

  • by ageoffri ( 723674 ) on Thursday April 16, 2015 @12:10PM (#49486943)
    If he is going to pay somewhere around twice market rate, he is putting chains made of dollars around his employees. It is very likely that no one getting one of these big raises will be able to leave his company for other opportunities. This can also setup employees to have to endure abusive work conditions that don't violate the law but still are bad.

    I'm not saying this is a bad move, but it may not be a purely good move for the employees.

  • by Dunbal ( 464142 ) * on Thursday April 16, 2015 @12:28PM (#49487139)
    In the meantime another CEO is paying himself a record salary for cutting his stock's value in half...
  • There are a lot of CEOs who make $1 per year to pay less in income tax, and rake in hundreds of millions in stock comp. Also, $70K is barely adequate in Seattle.

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