I could use advice on a weird situation in a very small family-owned software company. A direct report I inheirited 1.5 yrs ago is suddenly demanding a huge (~28%) raise immediately or else he'll quit. I have no recollection or notes of him ever complaining to me about compensation in 1-on-1's or otherwise. He is suddenly alleging that he was lied-to multiple times by his former managers (gone 1 year and 4 years respectively) as well as the founder/owner about compensation and growth opportunity in the company. But, he has produced no specifics or anything in writing and has never mentioned this to me before.
The employee has been with the company 5 years and his comp has increased nearly 40% over that time so it's not like he has been stagnant. I believe his comp is in line with the market and in fact I swear he told me a couple months ago that he was happy with his pay and thought it might be a bit over market.
There is clearly more going on here than a straight compensation discussion. Any wisdom as to how to extract and resolve the real core issue(s)? Should I write this off and let him leave as is the present direction this is heading? I do not respond well to extortion tactics or accusations about my current or former colleagues' integrity.