Gravity Payment $70,000 Minimum Salary Company

In April 2015, Dan Price, chief executive officer and founder of Gravity Payments, a private credit card processing and financial services company, announced that every employee would receive a minimum annual salary of US$70,000 over the next three years. Price said he was concerned about the increasing pay gap in the United States and news of his bold move went viral, causing debate over employee compensation plans and the wealth gap in society. At first, there was applause for his radical actions, causing an initial rise in new business. However, there was almost an immediate backlash both internally and externally. One senior worker at the company resigned, claiming that lesser-skilled workers would simply clock in and out while highly skilled workers were not similarly compensated with raises. A lawsuit was filed by Price's brother, a minority shareholder, who believed that the move would hurt the company. A number of clients left Gravity Payments while other companies criticized the move, saying it made them look stingy. Price attempted to tackle pay inequality by increasing salaries, but this created controversy. Employees were not the only stakeholders affected by Price's actions. What should Price do now?

This case is suitable for any business course that deals with ethical decision-making; strategic decision-making; compensation issues, such as human resource management; strategic management, or business ethics at either the undergraduate or graduate level. The objectives are:</ul><li>To evaluate the firm’s decision and its impacts on various stakeholders.</li><li>To recognize the conflicting interests among stakeholders, and management of stakeholder relationships.</li><li>To analyze compensation structures that motivate employees.</li><li>To evaluate how to effectively manage employees’ morale.</li><li>To recognize the role of economic disparity in the organization.</li></ul>

• compensation, salary, motivation, pay inequality, equity theory