Why did a CEO Pay Everyone $70k?

Remember David Price who decided to pay every employee at his company, Gravity, including himself, an annual salary of $70,000? A great many things went predictably wrong with that plan. One of the unpredictable things was a lawsuit.

Another problem is that Price is now involved in a lawsuit. Price told the New York Times, “We don’t have a margin of error to pay those legal fees.”

Price made it sound like the lawsuit was an event he didn’t expect.

But Karen Weisse at Bloomberg Business reports that it didn’t happen that way.

The lawsuit predates the raise. Lucas did file the case two weeks after Price’s announcement, but according to court records, Price was served with the suit at his house on the afternoon of March 16—about two weeks before the fabled hike with his friend and almost a month before the wage increase announcement. Washington state allows litigants to serve a defendant before a suit is filed with the court. Hollon, Lucas’s attorney, says Price informed his brother of the pay hike through an e-mail on April 9, only four days before the New York Times and NBC descended on Seattle. (Pirkle said that in a later document, Lucas “specifically referenced” the wage hike as grounds for the case. Hollon responded that the May document added the pay increase as “one of the potential factual bases supporting the claims in the lawsuit” since “the wage program appeared to be a reaction by Dan to the lawsuit.”)

[…]

In a follow-up interview in mid-November, I pressed Price about the inconsistency. How could what he told me about being served two weeks after announcing the raise be true when the court records indicated otherwise?

“Umm, I’m not, I have to look,” he said.

The court document, I said, definitely says March 16.

“I am only aware of the suit being initiated after the raise,” he replied.

“The court record shows you being served on March 16 … at 1:25 p.m.,” I said. “And actually, your answer to it was dated April 3,” also before the pay hike.

“I am only aware of the suit being initiated after the raise,” he repeated.

I asked again how that could be, saying the declaration of service shows Price was served with the complaint, the summons, and other documents, “that you are a male, who is white, age 30, 5-feet-8-inches, medium height, dark hair.”

He paused for 20 seconds. “Are you there?” he asked, then twice repeated his statement that he was only aware of the suit being initiated in late April. “I’d be happy to answer any other questions you may have,” he added.

And what is the lawsuit about?

The lawsuit is light on details, but it claims that Price “improperly used his majority control of the company” to overpay himself, in the process reducing what Lucas was due. “Daniel’s actions have been burdensome, harsh and wrongful, and have shown a lack of fair dealing toward Lucas,” the suit alleges. It asks for unspecified damages and that Price buy out Lucas’s interest in Gravity.

Before the flat pay was imposed, Price made considerably more than the average CEO of a company the size of Gravity (though Price disputes this).

There is a great deal more in the article (some of it even more scandalous). But it is likely, rather than altruism, this was Price’s attempt to deal with being accused of overpaying himself.