The Dark Side of Shareholder Capitalism

They say the workplace is your second home. I’m fortunate enough to work for Tablecloth, a company that genuinely cares about my wellbeing and success.

This focus on the employee experience starts from the top. Leadership puts in the effort to create a space our  staff are free to be human. In fact, authenticity itself is celebrated as a core tenet of our company culture. We are given room to grow and advance within the company, the flexibility to take time off when life requires it, and the peace of mind knowing our healthcare is covered and compensation is fair.

Our founders understand that how we’re treated at work inextricably affects our quality of life outside of work and vice versa. They recognize that we are actual people and not just cogs in a wheel. Simply put, they care.

And our entire business thrives because of it.

Yet as far as good company culture goes – we are most definitely the exception and not the rule. Living through a global pandemic is an eye-opening experience. 2020 brought to light some of the deepest cracks in our society and how we conduct business. One of the clearest inequities is the outsized influence companies wield over the wellbeing of their people.

It’s hard to ignore the enormous power of leaders at the helm when their decisions directly impact their workers’ ability to weather this storm. What happens when the C-suite chooses to “cut costs” in favor of lining their pockets during an ongoing health and economic crisis? It’s the equivalent of cutting the lifelines of millions of people and their families.

The pandemic only exacerbated the divide between the haves and the have-nots. We’re seeing these massive corporations – with pockets deep enough to drown in – who remain incredibly reluctant to provide even basic living wages and workplace protections to the “essential workers” who keep their empires running every single day. Their CEOs, Directors, and Shareholders  show no qualms about reaping the rewards of their soaring profits even as employees face mass furloughs, layoffs, and risk of infection.

This is particularly true of Amazon and Walmart, the country’s two largest corporations. Jeff Bezos and the Walmart heirs have grown $116 billion richer during the pandemic – 35x the total hazard pay given to their combined 2.5 million workers. Their frontline employees continue to struggle with the companies’ lack of transparency and adequate workplace protections while jeopardizing their lives for the job.

The disparities are shocking when broken down by the hour. A recent Brookings report reveals that “frontline Walmart associates working 40 hours per week will earn the equivalent of an extra $0.71 (pre-tax) for every hour they worked since the start of the pandemic. In comparison, the wealth of the three Walton siblings has risen $6.2 million per hour, even while they sleep. Frontline Amazon workers will earn the equivalent of an extra $0.99 per hour (pre-tax) for each hour worked over the pandemic. Meanwhile Jeff Bezos’ wealth has risen $11.5 million an hour.”

We’re experiencing such a painful socioeconomic fallout because of the way we’ve chosen to conduct business up until this point – glorifying a model that values shareholder capitalism over stakeholder benefit. Corporate power over social equity. Profit over people. It’s time to take a hard look at where this has landed us and why.

The federal minimum wage was established in 1938 to ensure that “all work would be fairly rewarded and that regular employment would provide a decent quality of life.” Yet we’re seeing the exact opposite of that play out.

Between 1979 and today, productivity grew 70.3% while hourly compensation of regular workers grew just 11.1%. In other words – productivity swelled 6x faster than typical worker compensation. Executive pay has grown by 940% in that same period, while typical worker compensation has only risen 12%. CEOs are getting paid more because of their power to set pay. Not necessarily because they possess critical skill sets or because their productivity rate has exponentially skyrocketed over the years.

The U.S. today thrives on “hustle culture” – an environment of toxic productivity that encourages near-constant working, and with it, a tidal wave of stress and burnout. I say “thrive” but really it’s killing us. Americans work longer hours, take less time off, and are pressured into making “whatever sacrifices necessary” to get ahead in the rat race. But the finish line is nowhere in sight. The ones at the top actually reaping those rewards have long figured out how to leverage their power to rig the system. Everyone else runs around in perpetual circles below them in a system stacked against the little guy.

The data tells us, plain and simple, that something needs to change. Minimum wage does NOT equal a living wage.

As an example – the MIT Living Wage Calculator calculates the national 2019 living wage in the U.S. to be $16.54 per hour, or $34,404 per year (specific wages vary by state and location). This means $68,808 per year before taxes for a family of four with two working adults and two children. That family needs to work four full-time minimum-wage jobs (a 75-hour work week per adult) to earn a living wage. A single-mother with two children earning the federal minimum wage of $7.25 per hour needs to work 138 hours a week in order to make ends meet. The equivalent of working nearly 24 hours a day for six days a week.

On the other hand, lifting the minimum wage to reflect the actual cost of living in modern society brings a multitude of benefits. Raising the minimum wage to $15 by 2024 would directly or indirectly lift wages for 39.7 million workers, over a quarter of the workforce. Doing so would generate $118 billion in additional wages, which would ripple out to the families of these workers and their communities. Since lower-paid workers spend much of their extra earnings, the injection of wages would in turn stimulate the economy and spur greater business activity and job growth.

Bottom line? Businesses play a concrete role in determining the quality of their workers’ lives. These aren’t siloed issues. Investors and employers play a critical role in shaping corporate behavior.

Yes, the pandemic upended our sense of normalcy. But all it really did was rip off the band-aid that so many of us had blissfully chosen to ignore. On the bright side, we’re already hearing calls for increased transparency and tighter regulation around human rights and labor rights protection.

The trend will only be reinforced in the recovery phase – especially given the workforce abuses highlighted by the pandemic. Failure to manage such human rights risks can expose businesses to legal, operational and reputational risks. The pressure for change comes from all sides. Not only from the workers themselves, but increasingly from investors and the public as well.

Tablecloth may be a small business, but even we have the capacity to make sure our team stays well-taken care of. There’s a solid case for larger companies to do the same, whether it’s for a moral imperative or an economic one. This is our chance to build back better in a way that truly addresses the structural problems in our labor practices.

If there’s one takeaway at all, it’s this: Pay workers a living wage and treat them fairly. That single first step will lift the lives of millions of people and all of us will reap the benefits as a society, together.