- Paul Constant is a writer at Civic Ventures and the cohost of the "Pitchfork Economics" podcast.
- He spoke with the author of a new report on the 2020-21 profits of 22 major corporations like Lowe's.
- Worker pay went up by $27 million in 2021, but those same companies bought back $800 million in stock.
In August 2019, nonprofit lobbyist association the Business Roundtable, which is made up of the CEOs of large corporations such as Apple and Walmart, issued an ambitious proclamation: They were redefining the goals of corporations to improve outcomes for the "benefit of all stakeholders — customers, employees, suppliers, communities and shareholders."
Jamie Dimon, the CEO of JP Morgan Chase who also heads the Roundtable, announced that the organization was making a shift toward stakeholders and away from shareholder primacy because investing in workers and communities "reflect[s] the business community's unwavering commitment to continue to push for an economy that serves all Americans."
The pandemic that began spreading less than half a year later, resulting in massive 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 reported record pretax profits of $2.8 trillion in 2021, and rather than invest those profits back into stakeholders like employees and customers, they bought back a record amount — an estimated $848 billion in 2021 — in stocks from shareholders. Even after being given the opportunity to live up to their promise, it's clear that corporations continue to prioritize shareholder wealth and the mindless accrual of profits over their employees, customers, and communities.
In this week's episode of "Pitchfork Economics," Katie Bach, a nonresident senior fellow at research group the Brookings Institution, discussed a report she coauthored with Molly Kinder and Laura Stateler for Brookings that investigated how corporations prioritized shareholder wealth in the wake of the 2019 stakeholder realignment.
Bach said that the 2019 press release is "a challenging commitment to assess, because they didn't commit to anything specific." In the report, she said, she and fellow researchers looked at 22 of the country'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) reporting from those 22 companies to examine their performance around three criteria: what they pay their workers, who gained wealth, and who lost wealth.
The results couldn't have been clearer. "I am as cynical as they come, and I had multiple jaw-drop moments while writing this report," Bach said.
The first was the discovery that 15 of the 22 companies fail 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 for a family to afford the basics of food, transportation, and shelter in the US. Bach and her coauthors came to that total by applying October 2021's inflation rate to the 2019 MIT total of $16.54 per hour.)
Those underpaid workers, meanwhile, are generating a tremendous amount of wealth for the 22 companies. Bach said their labor contributed to the $1.5 trillion in increased share value (a.k.a., wealth for shareholders) that these companies reported from January 2020 to October 2021.
And thanks to mechanisms like stock buybacks, more than half of that wealth — $800 billion — went to the richest 5% of all Americans in the shareholder class.
Worker pay also did go up in 2021 — Bach said seven million workers at these 22 companies got $27 billion in raises and bonuses over the course of the year.
However, that sum paid to workers, who as Bach said "were literally risking their lives every day to keep our economy running," is still a far cry lower than the $800 billion that was handed to shareholders in stock buybacks.
Much of that $800 million in buybacks could have gone to workers. Bach said that 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 worker wage." And it's not just Lowe's: Target spent $12,000 per worker on stock buybacks, Bach added.
These corporate employers, most of whom promised less than three years ago to rethink their profit structures to help build an "economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity," clearly didn't keep their word.
They were celebrated for their vague promise to prioritize stakeholders over shareholders, but instead chose to accelerate their handouts to the richest Americans, even as their employees stepped up to become the essential workers who kept the nation running amid a global crisis.
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