CMI: Since the start of the financial crisis, company executives have been routinely criticised for having salaries far greater than their average employee. But the boss of an American credit card payment processing company has taken a bold step to tackle this disparity.
Dan Price, founder of Gravity Payments, has raised the minimum wage of his employees to $70,000 (£48,000), funding the increase by reducing his own remuneration by 90%.
Seventy of the company’s 120 employees will receive a pay rise, with 30 of those seeing their salaries double.
During a weekly meeting, Price told staff: “You might be making £23,500 a year right now but everyone in here will definitely be making £48,000 a year and I’m super excited about that.”
The 30-year-old decided to undertake the extraordinary act after reading a study on happiness in the workplace.
The research conducted by Nobel Prize-winning economist Angus Deaton and psychologist Daniel Kahneman found that ‘emotional well-being’ rises with income for staff. However, according to the Princeton study, this increase has a limit; and that threshold is around £50,000 a year – at which more money had no measurable effect on day-to-day contentment.
The researchers determined the £50,000 figure by analysing Gallup surveys of 450,000 Americans in 2008 and 2009.
“The market rate for me as a CEO compared to a regular person is ridiculous. It’s absurd,” Price told ABC News. “My salary wasn’t $1m (£674,000) because I need that much to live, but that’s what it would cost to replace me as a CEO.”
Cutting his own salary to £48,000, the boss says he will also use 75% to 80% of the company’s anticipated £1.5m profit this year to fund the employee pay increases.
“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 it’s nothing I’m not willing to do. I’m single and I only have a dog,” said Price, who started the Seattle-based business in 2004 at the age of 19. by Jermaine Haughton