Corporate Chieftains Can Talk Less, Pay More

(Bloomberg Opinion) -- The Business Roundtable, an elite organization representing influential chief executive officers, is calling for change everywhere except Corporate America’s payrolls.

Millions of workers that big business employs are in a bad way. Their wages have been stagnant or in decline for decades. Many no longer earn a living wage – if they still have a job – and their struggle has fed, if not sometimes sparked, the protests sweeping the U.S.

Last week, the Business Roundtable urged Congress to pass another coronavirus bailout “to alleviate the economic challenges millions of Americans are confronting,” including “targeted aid to struggling individuals and families that offer relief while also encouraging a return to work.” It has also issued statements recently about paid time off for voting, police reform and racial justice.

Those are all worthy causes, but the group has done little about the one cause over which it has the most influence, if not outright control: workers’ economic insecurity.

It’s an issue the Roundtable professes to care about. The group’s revised “Statement on the Purpose of a Corporation,” released last summer and signed by 181 of its roughly 200 members, committed to serving all corporate stakeholders, including customers, employees, suppliers and communities. This was a strong break with the group’s traditions, upending a decades-old orthodoxy that corporations exist primarily to serve shareholders. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity,” the statement declared.

What happens when hard work isn’t enough? There are a number of handy calculators, such as MIT’s and the Economic Policy Institute’s, that peg a living wage for a family of four residing in a small town at roughly $60,000 to $70,000 a year. That figure is considerably higher for workers living in pricey cities. Now consider that the average full-time production and nonsupervisory worker at an S&P 500 company earned just $41,442 last year, according to data compiled by the AFL-CIO.

It’s not as if everyone in Corporate America is poorly compensated. Over the last decade, CEO pay at S&P 500 companies increased more than $340,000 a year to an average of $14.8 million in 2019, according to the AFL-CIO. Wages for average workers at those same companies over the same period of time rose just $836 a year. That disparity is even more glaring at companies that furloughed workers this year due to the coronavirus pandemic. The CEO of Burlington Stores Inc., for example, earned $35 million in 2019; workers there earned a median wage of $11,583. The CEO of Norwegian Cruise Line Holdings Ltd. was paid $17.8 million; the company’s workers took home a median wage of $16,925.

Let’s look at one of the most admired corporate giants, Amazon.com Inc. Its median total compensation for full-time employees was $36,640 in 2019, according to the company’s pay ratio disclosure. And Amazon’s founder and CEO, Jeff Bezos, is a prominent member of the Roundtable and signed its high-minded call to action last year.

Amazon’s workers take home even less than the company’s median pay implies. Amazon annualizes compensation for employees who did not work the entire year without distinguishing between workers who left voluntarily and those who were laid off. It also includes the value of restricted stock the company grants them, which is typically worthless if workers don’t stay with the company for a specified period and meet certain performance hurdles. Restricted stock is nice, but it doesn’t put food on families’ tables.

Amazon is far from alone. Walmart Inc. CEO Doug McMillon is also a Roundtable member and signed last year’s statement. The big-box retailer’s median worker pay was just $22,484 in fiscal year 2020, according to the company. You can add Target Corp.’s Brian Cornell, Marathon Petroleum Corp.’s Michael Hennigan, Home Depot Inc.’s Craig Menear and S&P Global Inc.’s Douglas Peterson to the list of Roundtable members with struggling workers.

If the Roundtable wants to make a difference, its members should pay their workers an adequate wage. Had it done so earlier, efforts by Congress and the White House to craft another bailout wouldn’t be entangled by what we see as an irrelevant issue: wages.

Legislators have let extended unemployment benefits lapse for America’s workers, with Republicans arguing that an extension of $600 a week in aid is a disincentive to work. Yet one of the core goals of the bailout is to support about 21 million unemployed Americans so they can afford basic necessities while Covid-19 ravages the economy. The only reason that skinflints in Washington can complain about benefits being higher than wages is because wages in our country are at shameful, rock-bottom levels. As long as companies insist on paying workers less than a living wage, adequate assistance will necessarily amount to more money.

A recent Yale University study found no evidence that people receiving higher unemployment payments were less likely to return to work. Nevertheless, Republicans have proposed reducing supplemental unemployment insurance to $200 a week through September, after which total unemployment benefits would be capped at 70% of lost wages. Again: 70% of an already sub-standard wage isn’t adequate, particularly for workers in notoriously low-wage industries such as retail and hospitality that have been hardest hit by Covid-19.

It’s not clear what the Roundtable can do about many of the social and political issues it has weighed in on recently. But its members can pay their workers better wages. Those employees get up and go to work every day like everyone else, and most of them are still falling well short of earning an adequate living.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.

Timothy L. O'Brien is a senior columnist for Bloomberg Opinion.

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