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*Note — This post has been updated and revised to reflect new information and developments
In 2015, a small Seattle-based payment processing company made headlines when its then 31-year-old CEO made a rather jarring change to the company’s pay structure: Gravity Payments would pay all employees, at a bare minimum, $70,000 annually. It was met with a variety of reactions, ranging from those who hailed CEO Dan Price as a working-class hero, to those who thought it was a reckless and foolhardy move.
The reasoning behind Price’s actions, as he has explained, were that he had read a study that said the optimal level of happiness can be achieved with an income at around $70,000, and decided that he was in a position to make a difference. So he acted on it — by cutting his own salary by 90%.
Several months after making the change, we were in a position to see what happened as a result of Price’s decision. At that time, in the summer of 2015, a slew of articles and media attention focused in on Gravity Payments to see what had happened. At the time, most of that attention wasn’t very positive.
“A Company Copes With Backlash Against the Raise That Roared,” reads a New York Times headline. “CEO counting cost of £45,000 minimum wage decision,” says another, from The Telegraph. Many others circulated as well, all spelling doom for Gravity Payments, with Price’s new minimum wage policy as the chief reason for the company’s issues. Those articles accurately explained that the company did, in fact, lose business from clients anticipating fee increases, and others who didn’t want to be associated with what they felt was a political statement, or PR stunt.
But those pieces did overlook the fact that Price’s experiment wasn’t really a failure. In fact, Gravity Payments was, and still is, chugging along. Even though the company did lose a handful of clients, it actually signed on even more — so many more that it had to go on a hiring spree.
There have been some further revelations that need to be taken into account, however. Price was taken to court by his brother, who also had an ownership claim in Gravity Payments. He has also admitted that he wasn’t ready for the backlash his actions would cause — though it did give his company plenty of attention and publicity.