File it under “No good deed goes unpunished.” When Dan Price, CEO of Gravity Payments in Seattle, decided in April to pay all 120 of his employees at least $70,000 per year, accolades rolled in. The raises came out of Price’s own compensation package, and the move drew praise from advocates for greater parity between CEO and employee pay.
But it also generated backlash against the firm, which handles credit card processing for small businesses and turned a $2.2 million profit last year.
Some Seattle tech entrepreneurs griped that Gravity’s pay scale would cause a local compensation spiral. Business gurus called Price naïve. Conservative talk-radio host Rush Limbaugh called the move “pure, unadulterated socialism.” The firm lost a few customers who agreed, and more who worried that Gravity would pass along higher labor costs to them. (Price told reporters that the pay-raise plan attracted more than enough new business to make up for lost clients.)
But the most damning repudiation came from two long-time employees. They quit. A former financial strategist who put in 60-hour workweeks for years as the company grew told The New York Times, “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.”