Gravity Payments CEO Dan Price made headlines in April by setting his company's standard annual salary at a very respectable $70,000. That meant that everyone — Price included — earned $70,000 regardless of position. The announcement went over well with Gravity's staff.
But Price didn't even have for a victory lap before the backlash started. In a piece for The New York Times, Patricia Cohen caught up with Price and found the CEO had gone from ballyhooed to beaten down. Workers resented having salaries advertised publicly. Senior employees resented making the same as underlings despite extra responsibilities. Gravity's business partners worried they'd have to field $70,000 salaries in their own companies. In short, it was a mess.
"This is a story of God being in the details. Or, [that] leadership at the ethereal and visionary level isn't enough," Harvard Business School historian Nancy Koehn said Tuesday on Boston Public Radio.
In 2012, the average US salary was just under $27,000, and 66 percent of workers made less than $41,212. Gravity Payment's $70,000 salary was generous by all accounts, but Koehn said workers care most about what their colleagues are making.
"Pay is actually extraordinarily relative. People care less about absolute numbers than they do about" relative numbers, she said.
BPR cohost Margery Eagan noted many professions have accepted flat pay levels like Gravity's system without the drama and intrigue.
"A teacher who is working like a dog, doing a great job, spending time after school, helping the kids [...] makes the exact same money as that person down the hall who's clocking in and clocking out," Eagan said.
Koehn placed the story of where Gravity Payments fits within a broader narrative about US income inequality.
This stuff -- wages, the political arithmetic of maintaining the family, the American dream -- that's sitting in businesses' laps.
"This stuff: wages, the political arithmetic of maintaining the family, the American dream, that's sitting in businesses' lap, [...] it's dependent on the Dan Prices to light fires," Koehn said. "The private sector's got to do something here."
Despite the discomfort and the bad press, Koehn considered Price's experiment a worthy one.
"He does not look naive," Koehn said. "Dan Price really wanted that, he wanted other companies to try to step up to the social responsibility plate, and do something different, and new."
