- Paul Constant is a writer at Civic Ventures and co-host of “Fork Economy” podcast.
- He spoke with the author of a new 2020-21 earnings report from 22 major companies like Lowe’s.
- Workers’ wages increased by $27 million in 2021, but those same companies bought back $800 million in stock.
In August 2019, the non-profit lobbyist association The Business Roundtablewhich is made up of the CEOs of major corporations such as Apple and Walmart, issued an ambitious statement: They were redefining the objectives of companies in order to improve results for the “benefit of all stakeholders – customers, employees, suppliers, communities and shareholders”.
Jamie Dimon, CEO of JP Morgan Chase, who is also leading the roundtable, said the organization is moving towards stakeholders and moving away from shareholder primacy because investing in workers and communities “reflects[s] the business community’s unwavering commitment to continue pushing for an economy that serves all Americans.”
The pandemic that began to spread less than six months later, resulting in mass layoffs and a significant drop in business activity, seemed like the perfect opportunity to put this newfound commitment to the test. Unfortunately, that is not what happened.
Instead, companies reported record pre-tax profits of $2.8 trillion in 2021and rather than reinvesting those profits in stakeholders such as employees and customers, they bought back a record amount – an estimate $848 billion in 2021 — in shareholder shares. Even after being given the opportunity to deliver on their promise, it’s clear that companies continue to prioritize shareholder wealth and the insane accumulation of profits over their employees, customers and communities.
In this week’s episode of “Pitchfork Economics“, Katie Bach, nonresident senior scholar at the Brookings Institution Research Group, explained a report she co-wrote with Molly Kinder and Laura Stateler for Brookings which investigated how companies prioritized shareholder wealth following the 2019 stakeholder realignment.
Bach said the 2019 press release is “a difficult commitment to assess, because they didn’t commit to anything specific.” In the report, she said, she and her fellow researchers looked at 22 of the nation’s largest and most influential employers of traditionally low-wage workers, including Amazon, Best Buy, CVS, Walmart and Target.
The Brookings Group reviewed the pandemic-era annual reports and ESG (environmental, social and governance) reports of these 22 companies to examine their performance around three criteria: what they pay their workers, who gained wealth and who lost wealth.
The results could not have been clearer. “I’m as cynical as they come, and I had several stunned moments while writing this report,” Bach said.
The first was the discovery that 15 of the 22 companies failed to “pay even half of their workers a living wage” of $17.70 per hour. (The MIT Living Wage Calculator estimates how much it costs a family to pay for the basic needs of food, transportation, and housing in the United States. Bach and his co-authors arrived at this total by applying the October 2021 inflation rate to the 2019 MIT total of $16.54 per hour.)
Meanwhile, these underpaid workers generate enormous wealth for the 22 companies. Bach said their work contributed to the $1.5 trillion increase in share value (i.e. shareholder wealth) these companies reported from January 2020 to October 2021.
And through mechanisms like stock buybacks, more than half of that wealth — $800 billion — went to the wealthiest 5% of all Americans in the stockholder class.
Workers’ compensation also rose in 2021 — Bach said seven million workers at those 22 companies got $27 billion in raises and bonuses during the year.
However, this sum paid to the workers, who, as Bach said, “literally risked their lives every day to make our economy work”, is still far less than the 800 billion dollars that have been returned to shareholders in buyouts. actions.
Much of that $800 million in buyouts could have gone to workers. Bach said hardware retailer Lowe’s 2020 median salary for full-time workers was $24,000, and during that time Lowe’s “spent $36,000 per worker on stock buybacks, so they could have more than doubled their median workers’ wages.” And it’s not just Lowe’s: Target spent $12,000 per worker on stock buybacks, Bach added.
These corporate employers, most of whom pledged less than three years ago to rethink their profit structures to help build an “economy that empowers everyone to succeed through hard work and creativity and lead lives full of meaning and dignity”, clearly did not keep their word.
They were famous for their vague promise to prioritize stakeholders over shareholders, but chose instead to accelerate their donations to the wealthiest Americans, even as their employees have stepped up to become the essential workers who have enabled the nation to function in the midst of a global crisis.