13 ms·

Seattle C.E.O. Who Promised $70,000 Salaries Wins Suit Filed by Brother

153 points by peterkshultz 10y ago

rm_-rf_slash 10y ago
The only true tragedy here is that the relationship between two financially-sound brothers was soured by a dispute about how to get more money. Sometimes I think to myself that if I got into business with members of my family, things would somehow be different for us. Stories like this at least have the silver lining of an unambiguous answer: no.
- unit91 10y ago
  Depends on what everybody loves most. If it's money, forget about it. If it's something higher (other people, God, etc.) then I think it can really work well. I previously worked at a startup with my brother. We both had roughly 10% equity stakes and it never jeopardized our relationship, even when the company went through some tough times.
  - usefulcat 10y ago
    True, but the trick is accurately determining up front "what everybody loves most". Oftentimes people don't really know the answer to that for themselves, let alone for anyone else.
    - unit91 10y ago
      Totally agree. However, in the context of whether you can do business with your family members, you probably already know them well enough to make that assessment.
- agentgt 10y ago
  I'm not entirely sure it really had anything to do with money between the brothers. The details seem to be nebulous but I think it was a matter of "you made a massive decision with out me" process. Growing up with a brother I can attest to brotherly competition.
- zacharycohn 10y ago
  The suit had merit. Raise your salary to $1M+ but don't pay out any money to shareholders and suddenly 40% of a booming company isn't worth very much.
gwern 10y ago
"The judge also ordered Lucas to pay Dan’s legal fees." Ouch.
- dogma1138 10y ago
  That's common, and it's usually capped the ruling would have the amount of legal fees to be paid this doesn't mean that it covers the legal costs of the winning party, it hardly comes close in most cases unless it was really a uneven match to begin with (e.g. huge corporation vs an individual).
  - vessenes 10y ago
    In washington state fee shifting is very uncommon, actually. Unless the shareholder agreement provided for it, this should be interpreted as a real slap on the wrist -- essentially a sign the judge thought the suit was frivolous.
    - phonon 10y ago
      The shareholder agreement provided for it. https://www.scribd.com/document/317832018/Price-v-Price-Ruling#from_embed https://www.scribd.com/document/317832018/Price-v-Price-Ruli...
whack 10y ago
I'm all in favor for workers getting paid more, but I can understand the brother's perspective. Shareholders, especially ones who own 40% of the company, have a reasonable expectation that the company CEO will be acting in their financial interests. In this case, the CEO was acting in a way that is favorable to his employees' interests, but detrimental to the interests of the shareholders. Given that the CEO legally has a Fiduciary duty to the shareholders to protect their best interests, I can understand the brother filing suit. If the CEO also owned 100% of the company, or if the CEO was helping the employees with his own personal money, and not the company's money, there's no problem of course. But that isn't what he's doing. A cynical interpretation would be that the CEO is giving up 60% of the profits, in return for national fame and glory, while the brother is forced to give up 40% of the profits and gets nothing at all.
- Zombieball 10y ago
  I don't understand why the idea of employee interests and shareholder interest can't be aligned? If the shareholders are invested for the long haul, surely they are one in the same. Obviously this is a simplification / wishful thinking. But maybe it's what we should strive towards :)
  - existencebox 10y ago
    Let's be straightforward about this in asserting ourselves as employees; They already ARE aligned. If you're (my employer) not paying me well compared to competitors, I will absolutely walk, and you will be saddled with finding and training/ramping up a replacement. That is a direct cost to shareholders. It is in their best interest to ensure a reasonable continuity within their workforce both from a work output standpoint and a morale/culture standpoint, as teams I've been on which have had time to establish trust and understanding for each other have been remarkably more effective than those that did not. As such, pay is one of the "easiest to pull" strings to this end. There is some mental dissonance however, as I imagine this train of thought would be "obvious" to those in power, yet we see regular evidence of wage stagnation/suppression. If we don't assume incompetence, some optimum of balancing pay and churn has been found and accepted, and if I trust that they are making a self interested decision, there may NOT be a benefit to paying more. However, I'd really like to see the numbers, because my following intuition from a long time of watching the best engineers hop from job to job is that I probably wouldn't agree with their choice of calculations.
deleted 10y ago
[deleted]
tptacek 10y ago
Remember, the lawsuit isn't over the plan to pay all employees $70,000. It's a dispute between two cofounders, one long-departed, over executive compensation and profit sharing. There's also a dispute over the timing: Gravity claims the suit was filed after the minimum-salary announcement, but Lucas claims the suit was known by all parties to be in the works before the plan was known.
- ufmace 10y ago
  I didn't think this was necessary at first, but looking at the rest of the comment threads, apparently it is. I don't see any indication that anybody on either side of this suit ever claimed or even implied that the employee salary policy and the wisdom thereof has anything to do with the suit.
  - ZoeZoeBee 10y ago
    That's because the suit was filed before Dan Price decided to raise employee salaries to $70,000. It is concerning so few people commenting on here are aware of this. Edit: Dan Price made his announcement of the $70,000 pay plan a month after he was served, making matters even more troubling is his denial about the timing. http://www.bloomberg.com/features/2015-gravity-ceo-dan-price/pdf/gravity_price_certofservice.pdf http://www.bloomberg.com/features/2015-gravity-ceo-dan-price...
    - morley 10y ago
      Sorry if I'm misunderstanding you, but are you implying that (a) the CEO announced this salary increase to deflect any negative reaction to this suit, and (b) that denying any ulterior motive supports that theory? Both points seem shaky to me, unless there's more compelling evidence than the circumstantial timing.
      - ZoeZoeBee 10y ago
        No you're not misunderstanding, aside from the puff pieces what do you know about Dan Price? >When Lucas left the company, Dan raised his own salary (from $50,000 to $1 million in one year), causing a rift between the two. And so on March 16, one month before the famous $70,000 announcement was made, Dan was officially served a notice that Lucas was suing him. Court documents prove that Dan signed the papers and knew of the lawsuit. However, Dan claimed that he was being sued after the wage announcement because Lucas was jealous of the press. >Price raised his employees’ wages to $70,000 so his brother wouldn’t receive his fair share of Gravity Payment’s dividends, not because he want to improve his employees’ lives http://thehustle.co/dan-price-the-ceo-paying-everyone-70000-dollars-is-lying http://thehustle.co/dan-price-the-ceo-paying-everyone-70000-...
edw519 10y ago
MAJOR FAIL! Losing brother: “I am shocked and disappointed with the decision and I will be considering my options.” Winning brother: “My love for my brother is unconditional...I’m thankful for the opportunity to put this challenging time behind us,”. One of my biggest concerns the past 10 years or so has been the difficult of technology's distinguishing between "building stuff to make the world better" and "chasing nickels". This is clearly an example of the latter. Brothers in court? Disgusting. I have always been a big proponent of free markets and sure, everyone has a right (and responsibilty) to earn for their good work, but this is just beyond any of that. Stories like this one demonstrate the worst behavior in a world full of blessings. Frankly, I would sooner give it all up and do volunteer work before I would go to court against my own brother. Obviously, not everyone feels this way. What a pity some of us have lost our way and in the name of "something else", forgot what's really important.
- deleted 10y ago
  [deleted]
- forgottenpass 10y ago
  the difficult of technology's distinguishing between "building stuff to make the world better" and "chasing nickels". I don't think it's super complicated. It just became complicated as people that were decidedly not making the world better wanted the cachet of doing so. To me: unintentional positive externalities are still unintentional. Rationalizing profiting as a societal good basically makes someone the devil.
- nkrisc 10y ago
  I don't see what's any more wrong about brothers facing off in court than two strangers. There's not some otherworldly, mystical bond between brothers that doesn't or can't exist between any two people.
  - themartorana 10y ago
    I'd say it's pretty tough to approximate a sibling relationship. Now, I'm very close to my siblings, and we were raised extremely family-first, and my experience is entirely my own and not someone else's, but no, even my best life-long friendships that I cherish dearly cannot approximate my relationship and shared growing up with my siblings. YMMV I'm sure.
notadoc 10y ago
Business and close personal relationships, whether friends or family, tend to not mix well
JackPoach 10y ago
So, what's the news, really? Other than it's cool to offer $70K minimum to everybody (which is probably ain't much for Seattle)
- hugh4 10y ago
  There's undoubtedly a great many companies out there where everybody earns at least $70K. I have no idea how this guy managed to get himself in the news.
- ForHackernews 10y ago
  > (which is probably ain't much for Seattle) In 2014, the median per capita income in Seattle was $36,854[0] meaning that half those represented in this data earned less than that. [0] http://www.deptofnumbers.com/income/washington/seattle/ http://www.deptofnumbers.com/income/washington/seattle/
  - JackPoach 10y ago
    Wow, I was sure that proximity to Redmond made it more SF-like
    - ForHackernews 10y ago
      In San Francisco, it's still only $43,924: http://www.deptofnumbers.com/income/california/san-francisco/#percap http://www.deptofnumbers.com/income/california/san-francisco... I think we're in kind of a bubble on HN where we don't realize how much richer we are than the average person.
univalent 10y ago
It will surely be appealed. The 'feel good' story aside, this seems problematic. The brother owns 40% of the company and as such he can contest that the price (wages) that the majority shareholder is paying is greater than what the market commands.
- yannyu 10y ago
  The suit has nothing to do with employee wages. From the article: On Friday, Judge Theresa B. Doyle of Superior Court in King County, in Washington State, ruled that Dan’s brother, Lucas, had failed to prove his claims that Dan had overpaid himself and inappropriately used a corporate credit card for personal expenses. The judge also ordered Lucas to pay Dan’s legal fees.
kragen 10y ago
It seems strange that nobody has mentioned Dodge v. Ford Motor Company in this thread yet (except implicitly, by way of popular misconceptions about what the law does or doesn't require of executives.) This lawsuit, even though it isn't explicitly about the well-above-market wages paid to the employees, seems like a century-later version of Dodge v. Ford, given that context. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- wutbrodo 10y ago
  It's not that strange. The lawsuit is about alleged abuse of corporate credit cards for personal expenses and overpaying (by whatever definition) oneself as the CEO. It's a basic good-of-the-company vs personal-enrichment-of-the-CEO lawsuit. The nuances of shareholders vs other stakeholders in cases like Dodge vs Ford couldn't be less relevant. Did you read the article?
phonon 10y ago
Copy of the ruling https://www.scribd.com/document/317832018/Price-v-Price-Ruling#from_embed https://www.scribd.com/document/317832018/Price-v-Price-Ruli...

153 points by peterkshultz 10y ago

The only true tragedy here is that the relationship between two financially-sound brothers was soured by a dispute about how to get more money. Sometimes I think to myself that if I got into business with members of my family, things would somehow be different for us. Stories like this at least have the silver lining of an unambiguous answer: no.

unit91 10y ago
Depends on what everybody loves most. If it's money, forget about it. If it's something higher (other people, God, etc.) then I think it can really work well. I previously worked at a startup with my brother. We both had roughly 10% equity stakes and it never jeopardized our relationship, even when the company went through some tough times.
- usefulcat 10y ago
  True, but the trick is accurately determining up front "what everybody loves most". Oftentimes people don't really know the answer to that for themselves, let alone for anyone else.
  - unit91 10y ago
    Totally agree. However, in the context of whether you can do business with your family members, you probably already know them well enough to make that assessment.
agentgt 10y ago
I'm not entirely sure it really had anything to do with money between the brothers. The details seem to be nebulous but I think it was a matter of "you made a massive decision with out me" process. Growing up with a brother I can attest to brotherly competition.
zacharycohn 10y ago
The suit had merit. Raise your salary to $1M+ but don't pay out any money to shareholders and suddenly 40% of a booming company isn't worth very much.

gwern 10y ago

"The judge also ordered Lucas to pay Dan’s legal fees." Ouch.

dogma1138 10y ago
That's common, and it's usually capped the ruling would have the amount of legal fees to be paid this doesn't mean that it covers the legal costs of the winning party, it hardly comes close in most cases unless it was really a uneven match to begin with (e.g. huge corporation vs an individual).
- vessenes 10y ago
  In washington state fee shifting is very uncommon, actually. Unless the shareholder agreement provided for it, this should be interpreted as a real slap on the wrist -- essentially a sign the judge thought the suit was frivolous.
  - phonon 10y ago
    The shareholder agreement provided for it. https://www.scribd.com/document/317832018/Price-v-Price-Ruling#from_embed https://www.scribd.com/document/317832018/Price-v-Price-Ruli...

whack 10y ago

I'm all in favor for workers getting paid more, but I can understand the brother's perspective. Shareholders, especially ones who own 40% of the company, have a reasonable expectation that the company CEO will be acting in their financial interests. In this case, the CEO was acting in a way that is favorable to his employees' interests, but detrimental to the interests of the shareholders. Given that the CEO legally has a Fiduciary duty to the shareholders to protect their best interests, I can understand the brother filing suit. If the CEO also owned 100% of the company, or if the CEO was helping the employees with his own personal money, and not the company's money, there's no problem of course. But that isn't what he's doing. A cynical interpretation would be that the CEO is giving up 60% of the profits, in return for national fame and glory, while the brother is forced to give up 40% of the profits and gets nothing at all.

Zombieball 10y ago
I don't understand why the idea of employee interests and shareholder interest can't be aligned? If the shareholders are invested for the long haul, surely they are one in the same. Obviously this is a simplification / wishful thinking. But maybe it's what we should strive towards :)
- existencebox 10y ago
  Let's be straightforward about this in asserting ourselves as employees; They already ARE aligned. If you're (my employer) not paying me well compared to competitors, I will absolutely walk, and you will be saddled with finding and training/ramping up a replacement. That is a direct cost to shareholders. It is in their best interest to ensure a reasonable continuity within their workforce both from a work output standpoint and a morale/culture standpoint, as teams I've been on which have had time to establish trust and understanding for each other have been remarkably more effective than those that did not. As such, pay is one of the "easiest to pull" strings to this end. There is some mental dissonance however, as I imagine this train of thought would be "obvious" to those in power, yet we see regular evidence of wage stagnation/suppression. If we don't assume incompetence, some optimum of balancing pay and churn has been found and accepted, and if I trust that they are making a self interested decision, there may NOT be a benefit to paying more. However, I'd really like to see the numbers, because my following intuition from a long time of watching the best engineers hop from job to job is that I probably wouldn't agree with their choice of calculations.

deleted 10y ago

[deleted]

tptacek 10y ago

Remember, the lawsuit isn't over the plan to pay all employees $70,000. It's a dispute between two cofounders, one long-departed, over executive compensation and profit sharing. There's also a dispute over the timing: Gravity claims the suit was filed after the minimum-salary announcement, but Lucas claims the suit was known by all parties to be in the works before the plan was known.

ufmace 10y ago
I didn't think this was necessary at first, but looking at the rest of the comment threads, apparently it is. I don't see any indication that anybody on either side of this suit ever claimed or even implied that the employee salary policy and the wisdom thereof has anything to do with the suit.
- ZoeZoeBee 10y ago
  That's because the suit was filed before Dan Price decided to raise employee salaries to $70,000. It is concerning so few people commenting on here are aware of this. Edit: Dan Price made his announcement of the $70,000 pay plan a month after he was served, making matters even more troubling is his denial about the timing. http://www.bloomberg.com/features/2015-gravity-ceo-dan-price/pdf/gravity_price_certofservice.pdf http://www.bloomberg.com/features/2015-gravity-ceo-dan-price...
  - morley 10y ago
    Sorry if I'm misunderstanding you, but are you implying that (a) the CEO announced this salary increase to deflect any negative reaction to this suit, and (b) that denying any ulterior motive supports that theory? Both points seem shaky to me, unless there's more compelling evidence than the circumstantial timing.
    - ZoeZoeBee 10y ago
      No you're not misunderstanding, aside from the puff pieces what do you know about Dan Price? >When Lucas left the company, Dan raised his own salary (from $50,000 to $1 million in one year), causing a rift between the two. And so on March 16, one month before the famous $70,000 announcement was made, Dan was officially served a notice that Lucas was suing him. Court documents prove that Dan signed the papers and knew of the lawsuit. However, Dan claimed that he was being sued after the wage announcement because Lucas was jealous of the press. >Price raised his employees’ wages to $70,000 so his brother wouldn’t receive his fair share of Gravity Payment’s dividends, not because he want to improve his employees’ lives http://thehustle.co/dan-price-the-ceo-paying-everyone-70000-dollars-is-lying http://thehustle.co/dan-price-the-ceo-paying-everyone-70000-...

edw519 10y ago

MAJOR FAIL! Losing brother: “I am shocked and disappointed with the decision and I will be considering my options.” Winning brother: “My love for my brother is unconditional...I’m thankful for the opportunity to put this challenging time behind us,”. One of my biggest concerns the past 10 years or so has been the difficult of technology's distinguishing between "building stuff to make the world better" and "chasing nickels". This is clearly an example of the latter. Brothers in court? Disgusting. I have always been a big proponent of free markets and sure, everyone has a right (and responsibilty) to earn for their good work, but this is just beyond any of that. Stories like this one demonstrate the worst behavior in a world full of blessings. Frankly, I would sooner give it all up and do volunteer work before I would go to court against my own brother. Obviously, not everyone feels this way. What a pity some of us have lost our way and in the name of "something else", forgot what's really important.

deleted 10y ago
[deleted]
forgottenpass 10y ago
the difficult of technology's distinguishing between "building stuff to make the world better" and "chasing nickels". I don't think it's super complicated. It just became complicated as people that were decidedly not making the world better wanted the cachet of doing so. To me: unintentional positive externalities are still unintentional. Rationalizing profiting as a societal good basically makes someone the devil.
nkrisc 10y ago
I don't see what's any more wrong about brothers facing off in court than two strangers. There's not some otherworldly, mystical bond between brothers that doesn't or can't exist between any two people.
- themartorana 10y ago
  I'd say it's pretty tough to approximate a sibling relationship. Now, I'm very close to my siblings, and we were raised extremely family-first, and my experience is entirely my own and not someone else's, but no, even my best life-long friendships that I cherish dearly cannot approximate my relationship and shared growing up with my siblings. YMMV I'm sure.

notadoc 10y ago

Business and close personal relationships, whether friends or family, tend to not mix well

JackPoach 10y ago

So, what's the news, really? Other than it's cool to offer $70K minimum to everybody (which is probably ain't much for Seattle)

hugh4 10y ago
There's undoubtedly a great many companies out there where everybody earns at least $70K. I have no idea how this guy managed to get himself in the news.
ForHackernews 10y ago
> (which is probably ain't much for Seattle) In 2014, the median per capita income in Seattle was $36,854[0] meaning that half those represented in this data earned less than that. [0] http://www.deptofnumbers.com/income/washington/seattle/ http://www.deptofnumbers.com/income/washington/seattle/
- JackPoach 10y ago
  Wow, I was sure that proximity to Redmond made it more SF-like
  - ForHackernews 10y ago
    In San Francisco, it's still only $43,924: http://www.deptofnumbers.com/income/california/san-francisco/#percap http://www.deptofnumbers.com/income/california/san-francisco... I think we're in kind of a bubble on HN where we don't realize how much richer we are than the average person.

univalent 10y ago

It will surely be appealed. The 'feel good' story aside, this seems problematic. The brother owns 40% of the company and as such he can contest that the price (wages) that the majority shareholder is paying is greater than what the market commands.

yannyu 10y ago
The suit has nothing to do with employee wages. From the article: On Friday, Judge Theresa B. Doyle of Superior Court in King County, in Washington State, ruled that Dan’s brother, Lucas, had failed to prove his claims that Dan had overpaid himself and inappropriately used a corporate credit card for personal expenses. The judge also ordered Lucas to pay Dan’s legal fees.

kragen 10y ago

It seems strange that nobody has mentioned Dodge v. Ford Motor Company in this thread yet (except implicitly, by way of popular misconceptions about what the law does or doesn't require of executives.) This lawsuit, even though it isn't explicitly about the well-above-market wages paid to the employees, seems like a century-later version of Dodge v. Ford, given that context. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

wutbrodo 10y ago
It's not that strange. The lawsuit is about alleged abuse of corporate credit cards for personal expenses and overpaying (by whatever definition) oneself as the CEO. It's a basic good-of-the-company vs personal-enrichment-of-the-CEO lawsuit. The nuances of shareholders vs other stakeholders in cases like Dodge vs Ford couldn't be less relevant. Did you read the article?

phonon 10y ago

Copy of the ruling https://www.scribd.com/document/317832018/Price-v-Price-Ruling#from_embed https://www.scribd.com/document/317832018/Price-v-Price-Ruli...