🚨 Thrilled to release w/ @kathrynsbach & @StatelerLaura new @BrookingsMetro report -our most ambitious yet:
"Profits & the Pandemic: As shareholder wealth soared, workers were left behind"
We assess 22 leading companies during the pandemic.
A 🧵 1/
brookings.edu/research/profi…
"Profits & the Pandemic: As shareholder wealth soared, workers were left behind"
We assess 22 leading companies during the pandemic.
A 🧵 1/
brookings.edu/research/profi…
.@kathrynsbach @StatelerLaura & I ask: did the biggest corporations live up to their commitments & pandemic moment to finally adopt a more inclusive model?
Did workers -- and not just shareholders -- benefit from gains? Were losses shared equitably? Do companies pay fairly? 2/
Did workers -- and not just shareholders -- benefit from gains? Were losses shared equitably? Do companies pay fairly? 2/
We find that nearly all of the companies fell short of their commitments.
Overwhelmingly, financial gains benefitted (already wealthy) shareholders and execs...
..while frontline workers experienced greatest losses and shared minimally in gains.
Here are our key findings:
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Overwhelmingly, financial gains benefitted (already wealthy) shareholders and execs...
..while frontline workers experienced greatest losses and shared minimally in gains.
Here are our key findings:
3/
In 1st 22 months of the pandemic, shareholders at the 22 companies grew $1.5 trillion richer -- nearly TRIPLE their wealth increase in previous period.
Their gains were > 50x the pay gains to ALL 7 million frontline workers at those 22 companies, who earned extra $27 bn.
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Their gains were > 50x the pay gains to ALL 7 million frontline workers at those 22 companies, who earned extra $27 bn.
4/
Take @amazon.
Amazon's share price rose 84%, generating $787 billion in wealth for shareholders from Jan '20 - Oct '21--
--- 177x greater than ALL the additional pay (bonuses, pay bumps, COVID pay) given to the company's more than 1 million frontline employees.
5/
Amazon's share price rose 84%, generating $787 billion in wealth for shareholders from Jan '20 - Oct '21--
--- 177x greater than ALL the additional pay (bonuses, pay bumps, COVID pay) given to the company's more than 1 million frontline employees.
5/
Who benefits from these shareholder wealth gains? The richest households.
More than 70% of wealth for U.S. shareholders benefitted just the richest 5% of American households...
...vs just 1% for the bottom half of *all* American families, including most frontline workers.
6/
More than 70% of wealth for U.S. shareholders benefitted just the richest 5% of American households...
...vs just 1% for the bottom half of *all* American families, including most frontline workers.
6/
Assuming = distribution of wealth & pay: these financial gains would have raised the wealth of 6 million of the richest households by $140,000 per family...
..vs add'll $3,700 in pay for 7 mill workers over nearly 2 yrs, or just < $1/hr for a FT employee working 40 hrs/wk.
7/
..vs add'll $3,700 in pay for 7 mill workers over nearly 2 yrs, or just < $1/hr for a FT employee working 40 hrs/wk.
7/
At 7 of the companies, the wealth of 13 billionaire founders and heirs alone would have grown by nearly $160 billion since the start of the pandemic....
....more than 12x ALL extra pay to the 3.4 million U.S. workers those companies employed during this time period.
8/
....more than 12x ALL extra pay to the 3.4 million U.S. workers those companies employed during this time period.
8/
As profits soared, companies spent 5x more rewarding shareholders (via dividends & #stockbuybacks) than raising pay for workers.
If companies had redirected stock buybacks to > worker pay, the companies could have > annual pay for their median worker by an avg of 40%.
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If companies had redirected stock buybacks to > worker pay, the companies could have > annual pay for their median worker by an avg of 40%.
9/
Despite hype & hope, pay has gone up only modestly in real terms since start of pandemic.
We estimate companies raised pay -- adjusted for inflation-- by avg of 2-5% through Oct 2021.
Since then, fast-rising inflation likely eroded some -- or even all- of those gains.
10/
We estimate companies raised pay -- adjusted for inflation-- by avg of 2-5% through Oct 2021.
Since then, fast-rising inflation likely eroded some -- or even all- of those gains.
10/
At most, only seven of the 22 companies are paying at least half of their workers a living wage—enough to cover just their basic expenses, and nothing more.
And only one company, Costco, has a minimum wage today that is even close to a living wage.
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And only one company, Costco, has a minimum wage today that is even close to a living wage.
11/
Most of the 22 companies we analyzed did phenomenally well in pandemic.
More than half were clear pandemic winners -- many had their best year(s) ever, and exceeded investor expectations quarter after quarter.
Profits at these "winning" companies rose by $56 bn, or 45%.
12/
More than half were clear pandemic winners -- many had their best year(s) ever, and exceeded investor expectations quarter after quarter.
Profits at these "winning" companies rose by $56 bn, or 45%.
12/
But a smaller number of companies were very hard hit by the pandemic and suffered significant losses.
When that happened, we found that workers bore the brunt of the losses, while shareholders & execs more insulated.
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When that happened, we found that workers bore the brunt of the losses, while shareholders & execs more insulated.
13/
At hardest hit companies, >380,000 workers were furloughed and > 40,000 were laid off.
Yet in 2020, nearly half of those companies changed CEO comp rules in ways that protected > $40 million in CEO pay, even as the companies underperformed and workers lost jobs & income.
14/
Yet in 2020, nearly half of those companies changed CEO comp rules in ways that protected > $40 million in CEO pay, even as the companies underperformed and workers lost jobs & income.
14/
For ex, in 2020:
@Hilton had worst yr ever, furloughed 1/3 workers - and changed rules so CEO Chris Nasetta earned addit'l $13.7 mill in pay.
As worker pay down 7%, @Chipotle changed CEO pay calcs so CEO Brian Niccols earned extra ~$24 mill -- or 1,800x median worker pay.
15/
@Hilton had worst yr ever, furloughed 1/3 workers - and changed rules so CEO Chris Nasetta earned addit'l $13.7 mill in pay.
As worker pay down 7%, @Chipotle changed CEO pay calcs so CEO Brian Niccols earned extra ~$24 mill -- or 1,800x median worker pay.
15/
In short, despite commitments by majority of 22 companies to voluntarily embrace “stakeholder capitalism,” the pandemic test revealed that the system changed little.
It still overwhelmingly benefits shareholders, execs, and billionaire heirs and founders - and not workers.
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It still overwhelmingly benefits shareholders, execs, and billionaire heirs and founders - and not workers.
16/
Meaningful change is unlikely to come from corporations themselves.
Execs and boards benefit from the current system - face consistent pressure to maintain it.
The lack of ambition in the Business
Roundtable #stakeholdercapitalism pledge was not a
bug—it was a feature.
17/
Execs and boards benefit from the current system - face consistent pressure to maintain it.
The lack of ambition in the Business
Roundtable #stakeholdercapitalism pledge was not a
bug—it was a feature.
17/
Instead, building a more equitable model of capitalism will require a new balance of power b/w execs, shareholders, workers, govt & society.
Policy reforms are needed: labor law, regulation of working conditions (including wages), corporate disclosure, corporate gov & more.
18/
Policy reforms are needed: labor law, regulation of working conditions (including wages), corporate disclosure, corporate gov & more.
18/
.@kathrynsbach @StatelerLaura and I call for specific policy recommendations:
1. Labor law reform to enable worker power
2. Higher minimum wages
3. Giving workers voice in corporate governance
4. Better data on pay
19/
1. Labor law reform to enable worker power
2. Higher minimum wages
3. Giving workers voice in corporate governance
4. Better data on pay
19/
Next Tue, join us at 2 pm as we discuss all of this.
Delighted that @BharatRamamurti from @WhiteHouse NEC will deliver keynote remarks.
Plus @michelleeisen @michelle_hejduk from @SBWorkersUnited.
+ @kathrynsbach & @RWartzman in fireside chat.
brookings.edu/events/profits…
20/
Delighted that @BharatRamamurti from @WhiteHouse NEC will deliver keynote remarks.
Plus @michelleeisen @michelle_hejduk from @SBWorkersUnited.
+ @kathrynsbach & @RWartzman in fireside chat.
brookings.edu/events/profits…
20/
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