The Gravity Payments CEO who raised all his employees' salaries to $70,000 may have been motivated by brother's lawsuit

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Last April, CEO and founder of Gravity Payments Dan Price stunned his 120 employees when he announced a new policy that would raise the minimum wage at his credit card processing firm to $70,000 a year.

The change would double some employees' annual wages and slash his own compensation from $1.1 million to $70,000.

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He received an overwhelming amount of attention: tremendous internal and external praise for his altruism, a bit of skepticism, and questions about whether or not it was simply a PR stunt.

Well, it may have been too good to be true.

A new report from Bloomberg Business' Karen Weise suggests his motives — which he described to us as altruistic, saying the idea occurred to him while hiking with a friend in Seattle — may actually have been to avoid a costly lawsuit served to him by his older brother, who owns about 30% of Gravity. It claimed that Price paid himself excessively for a number of years.

Previously Price had suggested that his brother may have sued in reaction to the wage increase, Weise reports. "I know the decision to pay everyone a living wage is controversial," Price told the Seattle Times, which first reported the lawsuit. "I deeply regret the rift this has caused in my relationship with my brother."

However, Weise uncovered that the lawsuit was actually served before the wage increase:

The lawsuit predates the wage hike and therefore couldn't have been in reaction to it. If anything, it may have been the other way around. According to court records (see here), Price was served with the suit at his house on March 16 — about two weeks before he said he first came up with the idea for the wage increase and almost a month before announcing it. Lucas's attorney states Dan didn't inform his brother of the pay hike until he sent Lucas an email April 9, five days before Dan announced the increase to staff. Lowering his own pay could give Dan Price negotiating leverage in the case.

When Bloomberg confronted him about the timing discrepancy, Price said he was "only aware of the suit being initiated after the raise."

When Business Insider reached out to Price, he said: "I have never once given myself a raise without a unanimous board vote. My pay was set based on what we thought it would take to replace me. We wanted the company to be able to continue to thrive with or without me as CEO."

The lawsuit contends that Price paid himself excessively, and indeed Weise found that Price's pay was very high for a company its size:

At private companies with sales like Gravity's total revenue, salary and bonus for the top quartile of CEOs is $710,000, according to Chief Executive magazine's annual compensation survey. At companies with sales like Gravity's net revenue, the top quartile pay falls to about $373,000. At companies with a similar number of employees as Gravity, the top quartile of CEOs makes $470,000 in salary and bonus. The CEO of JetPay, a publicly traded competitor that processes a similar volume as Gravity, received $355,000 in 2014.

Despite his past salary, he seems all-in on the new wage plan. A few weeks ago, Price told Inc. that he sold all of his stocks, drew everything from his retirement accounts, and mortgaged his two properties in order to make the new minimum wage work at Gravity.

But he may have a lot to gain in the move as well, Weise suggests — a $500,000 book deal and paid speaking gigs, for instance.

While it's still unclear what his motives were, the new company-wide $70,000 salary did positively affect many of his employees' lives.

Read the full report on Bloomberg Business.

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