It’s been a week since Dan Price became the newsiest CEO in the land by cutting his own pay and setting his company’s bottom salary at $70,000.
The decision made news everywhere and spread online like dengue fever. Many hailed Price – an Idaho native and CEO of Seattle-based Gravity Payments – as a hero, a businessman who sees his payroll as an expression of his belief in fairness and straight dealing. He once said in a speech, “We never want to make ‘screw-you’ money.”
This means the defenders of screw-you money are highly unsettled. Lots of people have decried Price’s move, arguing that happy employees are lazy employees, among other things. When Price went on Varney & Co., a Fox Business show last week, the first question was: “Are you a socialist?”
Price said no, but Rush Limbaugh knows better.
“Rush Limbaugh did three segments on me,” Price said in a phone interview Tuesday. “I grew up listening to Rush Limbaugh. My parents listen to Rush Limbaugh. He said I’m 100 percent a socialist. He said I’m incredibly dangerous. He said everyone who works for me is going to end up on welfare and I’m going to destroy their lives.”
Wow. What does Price think about that? I waited for him to tee off. Instead, he said, “I think I’m 50 percent right and Rush is 50 percent right.”
What? In what must be the Guinness World Record for generosity in responding to a wave of bloviation from Limbaugh, Price said he knows there are risks to his business model – that must be Rush’s 50 percent – but that he believes it will prove to be a positive investment in his workers that will pay off for the company, and that the problem of wealth inequality is so severe that he needed to do something bold.
As he told Varney, “I think there is a moral imperative for us as leaders to make things as good as we can for everybody.”
Last week, Price announced he was cutting his $1 million salary and diverting three-quarters of his company’s $2.2 million profits into higher pay for his employees. The new bottom salary of $70,000, to be phased in by the end of 2017, is a significant raise for many in the company who start below $40,000. Around 70 of the 120 employees in the Seattle office will be affected.
Privately owned Gravity Payments works with small businesses to negotiate processing fees for credit cards; it has 15,000 customers and has doubled its profits over the past several years. Price says big businesses are able to negotiate lower fees for credit-card processing, and one of his company’s goals is to bring similar leverage to bear for small businesses.
It’s based in Seattle, but works with customers all over the country, including here. The company estimates that it serves about 20 percent of the Spokane region’s market for its services, and has three employees here in sales. “We’re looking to grow there in a big way,” Price said.
Price grew up in southern Idaho, the fourth child in a family of six, in unincorporated Canyon County between Marsing and Melba. Starting in seventh grade, he played in a three-piece rock band. In high school, he started his credit-card processing business – growing from some informal help he was providing to a coffee-shop owner – and Gravity was officially founded when he was a freshman at Seattle Pacific University on a music scholarship.
His model, he said, is based on charging less and providing more than other companies – which sounds like boilerplate, but which has set him apart in a financial services sector where small businesses are often hit hard by fees that bigger companies can drive downward. He said he’s not always popular in his industry for this reason and that his critics have predicted his company would not last.
“People keep waiting for us to fail,” he said.
Instead, he’s had a lot of success. He was named entrepreneur of the year in 2014 by Entrepreneur magazine. His salary announcement was just the latest unusual step: A couple of years ago he gave all his employees a raise to offset an increase in the payroll tax. He has provided employees money to donate to the charity of their choice. He said his most recent decision was prompted by his growing sense that inequality was a corrosive social problem, that his lowest-paid employees were having a hard time affording life in expensive Seattle, and his reading on the research between income and happiness.
Price thinks he’s doing the right thing for his employees. But he also sees it as good business – a good “ROI,” or return on investment – and good for the economy overall. Since his company depends on other businesses, that helps him too. While his attitude is in some senses forward-looking and radical, it also has a lot of the hallmarks of old-fashioned, small-town values.
“It kind of goes back to my Idaho roots,” he said. “It’s how business is done in Idaho. It’s not a New York, San Francisco type of thing.”