- Paul Constant is a writer at Civic Ventures and co-host of the “Pitchfork Economics” podcast.
- He spoke with the author of a new report on the 2020-21 earnings of 22 large corporations like Lowe’s.
- Workers’ pay rose $27 million in 2021, but those same companies bought $800 million in stock.
In August 2019, the non-profit lobbying association Business Roundtable, which is made up of the CEOs of large corporations like Apple and Walmart, issued an ambitious proclamation: They were redefining corporate goals to improve outcomes for the “benefit of all.” stakeholders – customers, employees, suppliers, communities and shareholders.”
Jamie Dimon, CEO of JP Morgan Chase who also leads the Roundtable, announced that the organization was shifting to stakeholders and moving away from shareholder primacy because investing in workers and communities “reflects[s] the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
The pandemic that began to spread less than half a year later, resulting in mass layoffs and a significant decline in business operations, seemed like the perfect opportunity to put this new commitment to the test. Unfortunately, that’s not what happened.
Instead, corporations posted record pre-tax profits of $2.8 trillion in 2021, and instead of investing those profits in stakeholders like employees and customers, they bought back a record amount – estimated at $848 billion by 2021 – in shareholder shares. Even after being given the opportunity to deliver on their promise, it is clear that corporations continue to prioritize shareholder wealth and the mindless accumulation of profits over their employees, customers and communities.
On this week’s episode of “Pitchfork Economics,” Katie Bach, a non-resident senior fellow at the Brookings Institution research group, discussed a report she co-authored with Molly Kinder and Laura Stateler for Brookings that investigated how corporations prioritized the wealth of shareholders after the 2019 crisis. stakeholder realignment.
Bach said the 2019 press release is “a challenging engagement to evaluate because they haven’t committed to anything specific.” In the report, she and fellow researchers analyzed 22 of the nation’s largest and most influential employers of traditionally low-wage workers, which included Amazon, Best Buy, CVS, Walmart and Target.
The Brookings group examined 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 jaw-dropping moments while writing this report,” said Bach.
The first was the finding that 15 out of 22 companies cannot “pay even half of their workers the minimum wage” of $17.70 an hour. (The MIT Living Wage Calculator estimates how much it costs for a family to pay for basic food, transportation, and shelter in the U.S. Bach and his coauthors arrived at this total by applying the October 2021 inflation rate to the 2019 MIT total of $16.54 per hour.)
These underpaid workers, in turn, are generating enormous wealth for the 22 companies. Bach said his work contributed to the $1.5 trillion increase in stock value (aka shareholder wealth) these companies reported from January 2020 to October 2021.
And thanks to mechanisms like share buybacks, more than half of that wealth — $800 billion — went to the richest 5% of all Americans in the shareholder class.
Workers’ pay also increased in 2021 – Bach said seven million workers at these 22 companies received $27 billion in raises and bonuses over the year.
However, that amount paid to workers, who, as Bach said, “were literally risking their lives every day to keep our economy running,” is still far less than the $800 billion that was handed over to shareholders in share buybacks.
Much of that $800 million in buybacks could have gone to workers. Bach said that hardware retailer Lowe’s average salary in 2020 for full-time workers was $24,000, and during that time, Lowe “spent $36,000 per worker on share buybacks, so they could have more than doubled your average worker wage”. And it’s not just Lowe’s: Target spent $12,000 per worker on share 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 enables every person to succeed through hard work and creativity and to lead a life of meaning and dignity,” clearly not keeping his word.
They were celebrated for their vague pledge to prioritize stakeholders over shareholders, but chose to accelerate their giving to the wealthiest Americans even as their employees became the essential workers that kept the country running amid a global crisis.