Do you remember August 19, 2019?
Before COVID-19, before we all started rolling our eyes at the phrase “new normal?” Remember all the accolades and pats on the back you received for signing the stakeholder capitalism statement in which you pledged to move away from shareholder primacy? How are you measuring up to that today? Or perhaps, how are you measuring that at all?
Please consider this observation as a wake-up call.
Since 2019, shareholders of the 181 companies who signed the statement have collectively enjoyed over a 50% return (as a combination of buybacks, dividends, and market capital gains). Meanwhile, the average U.S. employee’s weekly earnings are up just 8%. Considering inflation over these past two years is nearing 7%, that means shareholder’s real gains are about 43 times that of worker’s real gains. That sure sounds like the old primacy rather than new, doesn’t it?
We don’t doubt that other stakeholders mentioned, such as suppliers, benefitted along with shareholders. And we definitely applaud the fact that many of you have continued stepping up for communities in meaningful ways, such as Bank of America’s commitment to supporting economic opportunity initiatives back in June 2020. But this is about workers, and most of you are failing them. The sad part is we know you don’t mean to. You have the power to collectively shift more rapidly to a more sustainable long-term system. But that time is running out.
Please note: Better treatment of workers is not just the right thing to do, it is the profitable thing to do. A 2020 McKinsey study found that many consumers will switch their brand loyalty to companies that treat employees better.
So, it is not enough to be dragged along toward $15 minimum wages or to simply make supportive statements on diversity. It is time for real change, now. Here are six things you can do by the end of the year to make a real difference:
Commit 20% of all shareholder buybacks and 10% of dividends to worker windfall or worker bonus programs. This does not impede shareholder value—it secures it for a sustainable long term by sharing with the share-makers!
Define and report on stakeholder metrics in every earnings call. As long as the metrics are still all about shareholder value, it’s not stakeholder primacy. Hold your executives accountable by tying compensation to progress on these metrics. It’s not moving from shareholder to stakeholder primacy if the incentives are still all about shareholder value.
While we are measuring and incentivizing, include stakeholder and worker compensation metrics in your vendor procurement processes as well. Your impact and influence should not end with your payroll. Rewarding good actors in your supply chain will help ensure the transition to a more sustainable form of capitalism that values workers as much as shareholders.
Commit to skills-based hiring to move to a more inclusive and upwardly mobile employment market. This starts by scrubbing superfluous degree requirements in your job descriptions and continues with promoting upskilling and training of employees (kudos to recent announcements by Walmart and Target in this regard).
Define every job in your company on whether it is a living wage job and publish that information so that employees and managers alike can help employees navigate accordingly. There are many great resources to gauge this, we like MIT’s.
We get it. Analysts threaten to punish your ratings if you make these adjustments unilaterally. But if not this group of 181 powerful CEOs, then who? If not now, then when?
And for the subset of the 181 CEOs who happen to lead investment banks, please support a brave new model of analyst coverage of companies that rewards this new vision. Play the long game. Support companies who walk the walk on stakeholder capitalism. Spread the word that a long-term horizon requires a stable societal structure and economy. If you’re truly managing for long-term gains, it is in your best interest to be less concerned about wage inflation, and more concerned about the lack thereof. Reward a growing, sustainable system.
My father always told me to watch what someone does, not what they say. We have watched as the ink dried for two years on a principle that held so much promise, yet we’re still waiting for real widespread progress for workers. Yes, we thank you for having the right perspective and commitment. We thank you for using your voices and your pens. Now it’s time to do more.
Workers stand ready to reward you with consumer dollars and brand loyalty. Analysts will follow your lead. But we need you to take the first step. Please, CEOs, walk the walk.
Fred Goff is the founder and CEO of Jobcase, an online platform that helps millions of working people find community support, self-improvement tools, and jobs.