In 2019, a group of business leaders signed a high-profile pledge promising that they would voluntarily move toward a more inclusive stakeholder-focused version of capitalism. But throughout the pandemic, those same companies reported record profits while workers were left behind. Brookings Institute Senior Fellow Katie Bach walks us through her new report examining the pandemic labor practices of 22 companies, spanning nearly every sector, and employing more than 7 million frontline workers.
Katie Bach is a Nonresident Senior Fellow at the Brookings Institute and the CBO of &pizza.
Twitter: @kathrynsbach
As shareholder wealth soared, workers were left behind https://www.brookings.edu/research/profits-and-the-pandemic-as-shareholder-wealth-soared-workers-were-left-behind
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Nick Hanauer:
There’s a profound lesson here. Although not a new lesson, it’s a lesson as old as history about self-regulation. That just generally, that’s not a thing.
Katie Bach:
Mm-hmm (affirmative).
Nick Hanauer:
It’s a strategy to fade the heat on actual regulation.
Katie Bach:
The more we believe that those in need of regulation will regulate themselves, the less inclined we will be to regulate them.
Nick Hanauer:
It’s just bullshit.
Speaker 3:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what, and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
Nick Hanauer:
So Goldy, on this podcast we’re going to celebrate a great date, August 19th, 2019. What happened on that day?
David Goldstein:
Oh, it’s one of the great moments in the history of corporate governance, Nick.
Nick Hanauer:
Okay.
David Goldstein:
That was the day that the Business Roundtable issued a press release saying that they redefined the purpose of the corporation to promote, quote, “An economy that serves all Americans.” And you know what, Nick? It was just in time, because that was August 2019. Six months later we were plunged into the COVID 19 pandemic and the economic turmoil that created. And, of course those corporations, these leading corporations, the largest employers in the United States, were all there to take care of their employees, right?
Nick Hanauer:
Yeah, they must have been so excited for the opportunity to live up to this commitment that they made.
David Goldstein:
That’s right. For example, in the press release, they lead off with a quote from Jamie Dimon, the chairman and CEO of JPMorgan Chase, and also the chairman of the Business Roundtable. He said, “The American dream is alive, but fraying. Major corporations are investing in their workers and communities because they know it is the only way to be successful over the long term.” And, he proved to be right in terms of his intent, as long as you count workers as CEOs and communities as shareholders.
Nick Hanauer:
Exactly. Well, today we get to talk to Katie Bach, who’s a senior fellow at the Brookings Institution who has done a deep dive and analysis on what actually happened, what those companies actually did for workers within the context of this bold new announcement around changing the purpose of the corporation. She has a new report out that details what happened, and I don’t want to spoil the interview, but…
David Goldstein:
Right, no spoilers here.
Nick Hanauer:
But, what she found I know will shock our listeners. They may not have completely lived up to that commitment. So, let’s talk to Katie.
Katie Bach:
I am Katie Bach. So, I wear two hats at the moment. I am the Chief Business Officer of a company called &pizza. We’re based in DC. We’ve got about 60 locations. It’s a fast-casual pizza chain that is known for its commitment to providing really good frontline jobs. My other hat is I am a non-resident senior fellow at the Brookings Institution where I write about low wage work and job quality.
Nick Hanauer:
So Katie, there’s a little bit of a showdown shaping up between stakeholder capitalism and shareholder capitalism, and we were wondering if you could sort of set the scene for us and describe for our listeners the differences and the development in that rivalry.
Katie Bach:
I think it’s helpful to go back a few decades. In the immediate postwar years our leading corporations had some sense that they had a responsibility to their communities, to society, to their workers. In other words, to stakeholders who were not shareholders. In those days, you had a much greater balance between worker power and corporate power, which contributed to this sense that corporations had. You can really see this in the numbers, right? So, you had about 30% of workers in unions, and in those post-war years you have wages moving in tandem with both productivity and company share price. So, there’s this sense that the pie is being distributed more equitably. Now, I want to be super clear. It was not inclusive for everyone. I am a woman. These would not have been amazing days for me. If you were non-white, this was not a great time. But, for at least white male workers, it was just a little bit of a different contract.
And so sometime around 1980, this really breaks down and you see this massive divergence between labor productivity and company productivity, and… plus company share prices on the one hand, and wages on the other. Not coincidentally, this kind of late 70s, early 80s breakdown comes pretty soon after an economist, Milton Friedman, writes this really famous New York Times article. In this article, he makes the case that the only purpose of a corporation is to increase profit, and that is really the definition of shareholder capitalism. So, this kind of academic and intellectual embracing of the idea that a corporation exists really only to serve as shareholders then really manifests, as I said, in kind of this breakdown between the old relationship between company success and… my personal focus is worker success, but also local community success, all of it. And so in the… let’s call it about 40 years since that breakdown, you see a very significant increase in inequality.
Now to get to the stakeholder capitalism point, we’ve got… You’ve got 2008, the Great Recession. At this point, shareholder capitalism has been ascendant and unquestionably dominant for about 30 years. Great Recession hits and suddenly some of this inequality that has been accumulating over the last 30 years is exposed. Suddenly, millennials realize like, “I will never be able to afford a house.” Homeowners across the US lose their homes and they can’t afford another one. There is this collective realization that the system is perhaps a lot more fragile and a lot less just than we thought. And so around that time, you start to get some forces fighting for a different conception of the responsibilities of a corporation.
It’s around this time that major corporations start coming under increased what I call social good pressure. So, you have ESG investors who focus on environment, sustainability, and governance. You’ve got social media enabled non-union labor activism like the fight for 15. You’ve got Occupy Wall Street, and you have increasing American support for a $15 minimum wage. I think, to me, the sign that this challenger view of what the responsibility of a corporation is became, if not rhetorically dominant, then at least prevalent.
I went to business school in 2010 at the MIT Sloan School of Management, and on my first day we heard a talk about stakeholder capitalism. So by 2010, rhetorically you are hearing a lot about stakeholder capitalism. You aren’t seeing much action. So, let me pause there. I can go into the more recent activity, but there’s my overview.
Nick Hanauer:
Why don’t we jump to the subject of your upcoming report, which is to report on this big commitment by many of the nation’s biggest companies to take their stakeholders and workers more seriously.
Katie Bach:
As I said, you’ve got this kind of post-Great Recession shift where more and more people are talking about, “Well, huh. Maybe corporations shouldn’t just look out for their shareholders who are becoming kind of obscenely rich.” So in August 2019, 181 members of the Business Roundtable… So, the Business Roundtable is a group of the country’s largest most powerful companies… really, their CEOs release a new statement on the purpose of the corporation. They’ve been releasing these statements since ’78, and historically, every one of those statements just reaffirmed shareholder capitalism, the purpose of a corporation is to drive profit for shareholders. In this August 2019 statement, they took a very different tack, and the first sentence was, “Americans deserve an economy that allows each person to succeed through hard work and creativity, and to live a life of meaning and dignity.”
And then they go through and they talk about what that means and the ways in which they will look out for not just their shareholders, but other stakeholders. And, as someone who focuses on workers, the part that most interested me was their commitment to, quote, “investing in our employees.” This starts with compensating them fairly and providing important benefits. What it did not say, and this is incredibly important, and this is a major theme of our report, is that all stakeholders are equally important. It just committed to give all of these stakeholders some amount of consideration. So, that was August 2019. Six months later the pandemic hits, and this is in some ways just the perfect test case for this commitment that they made.
David Goldstein:
Also, what it doesn’t do is it didn’t define what they meant by treating workers more fairly, what “fairly” meant.
Katie Bach:
Yeah, and I would actually argue that is not a bug so much as a feature. It was intentionally vague.
David Goldstein:
Right, because if this is a meritocracy and the market efficiently pays you exactly what you’re worth, then if you’re not making a livable wage, that’s because you don’t deserve a livable wage.
Katie Bach:
Exactly. So, that’s fair.
David Goldstein:
That’s fair. Right.
Nick Hanauer:
So, what happened, Katie?
Katie Bach:
Exactly what you would [crosstalk 00:11:25] expect to happen.
Nick Hanauer:
I’m in suspense. [crosstalk 00:11:26]
Katie Bach:
Right, I know, edge of your seat.
Nick Hanauer:
I’m so curious about whether these folks lived up to their commitment.
Katie Bach:
I mean, obviously not. What is mind-blowing, though, is how many people thought that they would. For this report, I went back and I looked at some of the press around this Business Roundtable announcement, and it was just… I mean, it was like this wide-eyed, credulous, “Capitalism is being saved by the capitalists!” moment.
Nick Hanauer:
Yeah.
Katie Bach:
Which was so patently absurd.
Nick Hanauer:
Right.
Katie Bach:
And yet, somehow we fell for it. So, what we did in our report is… and, it is a challenging commitment to assess because they didn’t commit to anything specific. So, what we did is we looked at 22 of the country’s largest, most influential employers of traditionally low wage workers. I can go through the list, but it’s kind of all the ones you would expect, Amazon, Best Buy, Costco, CVS, Walmart, Target, and so on. And we asked three questions. We said, one, “During this pandemic period, did they pay their workers fairly?” Two, “Who benefited from the gains during the pandemic?” And three, “Who bore the losses?” And, the TLDR, no, for the most part, workers are not paid fairly. Two, shareholders and executives benefited from gains, not workers. And, three, workers disproportionately bore the losses.
Nick Hanauer:
And you say those words, but it’s really worth elaborating on by how much.
David Goldstein:
Yeah.
Nick Hanauer:
Right? [crosstalk 00:13:11]
David Goldstein:
The numbers in your report are startling. [crosstalk 00:13:14]
Nick Hanauer:
Why don’t you take us through this?
Katie Bach:
I will tell you, I am as cynical as they come, and I had multiple jaw-drop moments while writing this report. So, let’s start with fair pay. We have heard a lot, especially in the past, let’s call it six to eight months, about how this is a worker market, wages are going up, and so forth. By the end of the pandemic, at most seven of these 22 companies… we can only say five for sure, and I’ll get to why. At most, seven of these 22 companies paid even one half of their workers a living wage.
It’s really important to understand what a living wage is. A living wage is the wage that allows you to just survive. It covers rent, childcare, transport, healthcare, food. It leaves nothing for retirement saving, for an occasional meal out, for any form of luxury. I mean, this is the bare minimum. So, these are the 22 most iconic… these are some of the most profitable, successful companies the world has ever seen, and not even a third of them pay even half of their workers a living wage.
If you want to look at wage increases, there were only 11 companies that both raised wages and told us what the numbers were, so I think it’s fair to assume those are the 11 companies that did the most. The real pandemic wage increase, and we looked at January 2022-October 2021, was about 5%. If you pull that through to today with inflation, it’s closer to 2%. So from our perspective, there really wasn’t any… there was no interpretation of the word “fair” that described this group of 22 companies in terms of their worker pay.
Nick Hanauer:
But in the meantime, the shareholders and CEOs did pretty well during that period, didn’t they?
Katie Bach:
So then we looked at gains. And, gains are tricky, right? Because for shareholders and CEOs, we’re talking about wealth gains. There is no such thing as wealth gains for the workers of these companies because they are paid so little. As I said, most of them aren’t even paid enough to get by, let alone accumulate wealth. So what we did was… the closest proxy we could find is we compared wealth gains for shareholders to all additional investment in workers. So, that was any wage increase. That was any hazard pay, or what we called COVID pay during the pandemic. It was any profit share or bonus scheme. Every way in which these companies shared success with workers. And, before I get into the numbers, one really important thing to remember is that for a lot of these companies, 2020 was the best year on record.
We think of the pandemic as a very difficult time for businesses, and for many it was, but for companies like Amazon, Target, Best Buy, Home Depot, Lowe’s, these were phenomenal times. So, we looked at share price increases. What’s kind of amazing is between January 2020 and October 2021, the period we looked at, the average share price increase for these companies was 50%. If you compare that to the S&P for the prior 22 months, the S&P 500 for the prior 22 months was like 20%, so this was just a boom time.
David Goldstein:
Yeah, and you’re not cherry-picking, because you picked January 2020.
Katie Bach:
Exactly.
David Goldstein:
Before the market crashed in March.
Katie Bach:
That’s correct. We intentionally picked January. I will also say 12 of the companies we looked at were clear winners, 10 were not. We also included companies like Marriott, Hilton, Disney, GAP, Macy’s, Walgreen’s, companies that did have a really rough pandemic, so that 50% number is just astounding. It brings us back to those images we all saw in the early days of the pandemic of those miles-long lines at food banks, while all of us who were looking at our investments were just doing extraordinarily well.
So, that’s the share price. Where it gets kind of really incredible is when you look at the gains. So these 22 companies over that period generated $1.5 trillion in wealth for shareholders. That is almost an unthinkable number. I will say that is about a third of the size of the entire United States budget. Of that, if we want to just look at how much of that went to really rich Americans, it was about $800 billion. So, $800 billion from just these 22 companies went to the richest six million American families.
Kind of by coincidence, six million richest families we can compare to the seven million American workers of these companies. So, these seven million workers got $27 billion in extra pay. So it is $800 billion for the top 5% of American families, versus $27 billion for these seven million workers who are literally risking their lives every day to keep our economy running. And, one way that I think it’s helpful to look at these numbers is if you do it on a per-family basis, that’s $140,000 gain for really, really rich Americans from doing nothing, just from owning stock in these companies. For an individual worker family, it’s about a dollar an hour extra over that period.
Nick Hanauer:
A lot of people, of course, bought that when this press release was sent out that this would have a meaningful impact on corporate behavior. Not me, because… I guess there’s a profound lesson here. Although not a new lesson, it’s a lesson as old as history, about self-regulation. That just generally, that’s not a thing.
Katie Bach:
Mm-hmm (affirmative).
Nick Hanauer:
It’s a strategy to fade the heat on actual regulation and actual standards.
Katie Bach:
Correct.
Nick Hanauer:
I think that this is just another great example of how that doesn’t work. Before you got on the show this morning, we were arguing about whether it was a step forward or a step backwards that they did send out this press release. What’s your view?
Katie Bach:
If you’d asked me nine months ago I would’ve said, “A step back,” because the more we believe that those in need of regulation will regulate themselves, the less inclined we will be to regulate them.
Nick Hanauer:
Yeah.
Katie Bach:
Having seen the amount of activity around worker power over these past nine months, I believe that the actors who we need to be extremely skeptical are extremely skeptical. And given that, I think that the good aspect of this is it says that the companies are feeling a little bit of heat. So, I now see this as a… let’s call it a neutral thing, whereas before I would’ve seen it as unquestionably negative.
Nick Hanauer:
Interesting. Okay. I saw it as a baby step forward because at least you had these folks acknowledging there was a problem, right? That is something.
David Goldstein:
Were you hoping for a little cognitive dissonance to kick in? That if they say these things, they’re more likely over the long run, however long that is, to act on it a little bit?
Nick Hanauer:
No, no, no. I had no hope. I had absolutely no confidence that anybody was going to do anything. But, what it does do is open up the national conversation around how unfair this is. They’ve gone on record now saying, “Yeah, we kind of screwed everybody.” So, we get to use that forever, but the idea that there was something of substance was going to come from this was just ridiculous. It was never going to happen.
David Goldstein:
I’m curious, Katie. The progress you see in the last eight months, how much of that do you think comes from increasing social pressure, and how much do you think it comes from just a really tight labor market?
Katie Bach:
Hard to say. Let me put it this way. I think a really tight labor market was perhaps a necessary condition and not a sufficient condition. I think absent the really tight labor market, we would not be seeing this level of pressure. Now that we are, it does seem a little contagious. I was looking at the numbers of Starbucks that have filed… Disclaimer, I was a corporate strategy director at Starbucks a few years ago. I’m looking at the number of Starbucks that have filed to unionize, and it is moving quickly. They are not able to get a hold on that as a corporation. So, I think the tight labor market enabled it.
Nick Hanauer:
That’s great. So, are there any particular juicy stories from your research that are worth sharing?
Katie Bach:
Yeah. I never know if what infuriates me is going to infuriate other people. There are any number of pretty heartbreaking worker stories, where Disney starts funneling money to shareholders right as they decide to increase their number of layoffs. But, there are two things that I found just absolutely enraging. One was when we looked at the stock buyback numbers. When I was in business school, I was taught that a company buys back stock if it has literally no other productive use for that money. It’s like, “We are sitting on this excess cash and we have nothing to do but funnel it back to shareholders.”
If you look at some of these stock buyback numbers… so again, this is just excess cash that they’re handing to shareholders, on a per-worker basis… I mean, take Lowe’s. Lowe’s 2020 median wage was $24,000, so it is below a living wage. In the period we looked at, they spent… actually, it was in a four quarter period. They spent $36,000 per worker on stock buybacks. So, they could have more than doubled their median worker wage. Target? Target spent $12,000 per worker on stock buybacks [crosstalk 00:23:59]
Nick Hanauer:
That’s just astonishing.
Katie Bach:
It is shocking. So, those numbers, especially Target’s, just because that’s a really big number, blew me away. The stories that I found really infuriating were how they protected CEO compensation. Basically the way CEO incentives are supposed to work is when the company performs badly the CEO does not get paid as much. That is that why anywhere from 50-90% of CEO compensation is specifically tied to company financial performance. Of the 10 companies who had a rough 2020 for one reason or another, four of them just blatantly changed the rules to protect CEO compensation. Take Hilton, they had the worst year on record, they had a net loss of $715 million. They just changed their performance parameters which gave their CEO an additional $13.7 million in compensation while nearly 50,000 of their workers were furloughed.
David Goldstein:
Yeah. That’s so weird that a board filled with CEOs would protect the compensation of a CEO.
Katie Bach:
My favorite chart in our report is one that we built that shows the board interactions between the companies, and how board members just either former, present, or future colleagues of the people they’re supposed to be governing. Imagine two lists of companies and then just spaghetti between them.
Nick Hanauer:
Right. Yeah, it’s a pretty incestuous crowd.
Katie Bach:
It is.
Nick Hanauer:
Yeah, and they don’t pick you for the board if you’re going to mess with their compensation.
Katie Bach:
As it turns out [crosstalk 00:25:47]
David Goldstein:
I had cut you off. You were going to talk about Chipotle?
Katie Bach:
Yeah. So Chipotle, I just… this was a little egregious just because it’s such a small company. What Chipotle did, which… it was sort of symbolically interesting. To be fair the executive team did perform very well. At the same time 2020 was, for many reasons, a tough year for the company and profits were down from the prior year. So when it came time to do exec comp, the company literally erased the worst pandemic quarter from the calculation. They just pretended it never happened, and that secured their CEO an additional $34 million. And, what’s so amazing about that to me is the symbolism. They just erased this quarter. It never happened. Meanwhile, worker earnings were actually down even with the hazard pay, because workers were getting so few hours.
Nick Hanauer:
One of the things that I love about your analysis that we have not done ourselves is converting stock buyback numbers to dollars per worker. That’s a very potent way to analyze those numbers. It’s a great way to contextualize that, particularly for low wage employers.
Katie Bach:
Yeah.
David Goldstein:
It’s a great way of illustrating it.
Nick Hanauer:
Yeah, yeah.
David Goldstein:
$12,000 per worker at Target. And by the way, in the past few weeks, I’ve twice walked into a Target and walked out because the lines at the cash registers were too long. They were mostly empty because they can’t hire enough employees.
Katie Bach:
Yep.
David Goldstein:
But, they certainly have enough money for stock buybacks.
Katie Bach:
Yeah.
Nick Hanauer:
Yeah.
David Goldstein:
That can’t be good for business.
Nick Hanauer:
Yeah, exactly. So we always… we love to ask the benevolent dictators question. What should we do? What’s your prescription for change?
Katie Bach:
How much time do you have? So, a few things. I would separate this into two buckets. One is directly forcing corporations to behave in ways that we know are good for society on a net basis. The second is enabling other actors to exert power, to be power counterweights in this system in which corporations have accumulated almost all of the power. So on the first, the most obvious is just raise the minimum wage. It should be… to me, 15 is sort of the minimum standard. As inflation increases, it should potentially be higher. We also need more regulation around scheduling. I would argue that we need some form of regulation around take home pay and percentage of part-time and full-time workers. We need regulation around sick pay and so on and so forth. So, that’s the like, “Make corporations do the right thing.” And by the way, it doesn’t have to be bad for business. Look at Costco. They have a $25 average wage and they’re wildly successful.
The other side is how do we enable other actors to exert power? This involves reforming labor law first and foremost. I would argue it involves things like putting workers on boards, or I should say, worker representative on boards. And then, one thing I don’t hear enough about, but I think is so critical, is changing disclosure requirements. I mentioned earlier that we think up to seven of these companies pay half their workers a living wage. The reason we don’t know is that companies don’t have to tell us essentially anything about how they treat their workers. The minute you change that, consumers can hold companies to account. And the truth is even if consumers don’t take that step, companies will believe that they will. So, that’s my sort of benevolent dictator world.
David Goldstein:
So, that would just be in the quarterly report along with all the other required data that they have to disclose, they would have to have some pay transparency?
Katie Bach:
What I would argue for is a distribution of annualized take home pay. So, what percentage of your workers make under $5,000 a year? 5-10, 10-15? I have worked with a number of C-suite teams of Fortune 100 companies and presented this information, and the executives are shocked. They have no idea how bad it is, which is its own problem. But, this type of disclosure would be incredibly powerful.
David Goldstein:
Couldn’t you do that through an SEC reg?
Katie Bach:
It should be through an SEC reg. That’s right.
David Goldstein:
Oh Nick, I think this is something. See, I’d never thought about this, but that’s something that’s doable. Doesn’t even require Congress, right?
Katie Bach:
Exactly. That’s why this is the one I fight for so much.
David Goldstein:
Yeah. No Senator Manchin or Sinema to get in the way.
Katie Bach:
Nope, just an SEC requirement. And I will tell you, companies will say, “This is burdensome, blah, blah, blah.” I have done this analysis at multiple companies. It took me like half a day, which means that they can get some analyst to do it [crosstalk 00:30:48]
Nick Hanauer:
Yeah, Sarbanes-Oxley is crushing. This? Not.
Katie Bach:
Exactly.
David Goldstein:
Yeah, but they already hire one of three payroll companies to send out all their checks. They have all the data.
Nick Hanauer:
Yeah [crosstalk 00:31:04]
Katie Bach:
Exactly.
Nick Hanauer:
This is not a tough lift.
Katie Bach:
No, it’s really not.
David Goldstein:
That’s great. That’s [crosstalk 00:31:08]
Nick Hanauer:
And by the way, it was simply a change of an SEC regulation that enabled stock buybacks. You can change that back ,too.
Katie Bach:
Yeah. I am so intrigued by that. Or, put a threshold.
Nick Hanauer:
Yeah.
Katie Bach:
You can do a stock buyback only once X percent of your workers make a living wage.
Nick Hanauer:
Right. And one final question, Katie, why do you do this work?
Katie Bach:
Because I believe that everyone deserves jobs with dignity and meaning. We spend a lot of our time at work and there are those of us like me who through really no reason other than luck have ended up in these incredibly fulfilling careers that are both highly lucrative and intellectually stimulating. There are tens of millions of Americans who are underpaid, humiliated, disrespected every single day, and it just breaks my heart.
Nick Hanauer:
As it should.
Katie Bach:
Yep.
Nick Hanauer:
Yep. Well, fantastic. Thank you so much for being with us. Wow. What a great report.
Katie Bach:
Thank you.
Nick Hanauer:
It’s…
David Goldstein:
Yeah, I [crosstalk 00:32:07]
Nick Hanauer:
It’s wonderful and depressing all at the same time.
Katie Bach:
Exactly.
David Goldstein:
And a great resource.
Katie Bach:
Fantastic. Thank you so much.
Nick Hanauer:
August 19th, 2019, a day that will live in…
David Goldstein:
Bullshit.
Nick Hanauer:
What will it live in? Yeah, bullshit.
David Goldstein:
Yeah, yeah. Big, steaming pile.
Nick Hanauer:
Jamie Dimon has become like a caricature of himself.
David Goldstein:
Was he ever not? I don’t know. I’ve never met him. I did once get pepper-sprayed outside a hotel he was at.
Nick Hanauer:
Believe it or not I once interviewed Jamie Dimon for a job. I’m not kidding. He had just gotten chucked out of… I can’t remember, some Wall Street company. He was unemployed, and we were looking for a CEO for one of my companies, aQuantive. I was chairman. And, somehow he got on the list of possible CEOs. We had a nice chat, but concluded that this was not a great fit. Obviously we did very well, but so did he. Anyway, it’s just so funny.
Look, Goldy, the moral of the story here is that the notion of self-regulation, it’s just bullshit. That commitment by the Business Roundtable was nothing more than a press release. It was a way to fade the heat on actual regulation. And, in fairness, everybody needs to be held to a high standard by other people. Children need to be held to a high standard, businesses, everybody. Frankly, it’s not on them in many ways to do the right thing, irrespective the those standards, but it is on society to hold folks to a high standard and the higher the standard, the better off the society will be. That’s just all there is to it.
David Goldstein:
Right? Well, one of the rules of thumb we talk about in terms of how markets work, it’s that markets are self-organizing, but not self-regulating.
Nick Hanauer:
Correct.
David Goldstein:
And that’s why you can’t rely on the Business Roundtable to get together and say, “Ah, man, we need to do a better job.”
Nick Hanauer:
Yeah.
David Goldstein:
And suddenly institute a new era of stakeholder capitalism. It’s not going to happen on its own. That’s why I think it was really interesting listening to Katie with her recommendations on how to address it. Nick, one of them was raise the minimum wage. You’ve been pushing for $15 minimum wage since 2012, and I think… I should say, you no longer push for that, Nick. What are you pushing for these days?
Nick Hanauer:
A progressive minimum wage where the largest corporations pay $25, medium size businesses with thousands of employees pay $20, and small businesses pay $15.
David Goldstein:
Yeah, and then we index that to something realistic. Probably not inflation, probably something more like-
Nick Hanauer:
Productivity?
David Goldstein:
…productivity, growth [crosstalk 00:35:23] which is how we used to informally index the minimum wage.
Nick Hanauer:
Correct.
David Goldstein:
She talks for… we’ve talked about this a lot, about the imbalance of power in the economy, the extraordinary imbalance of power.
Nick Hanauer:
Yeah.
David Goldstein:
She talks about strengthening the right of workers to collectively bargain, to create unions, and you’re seeing that now right here in Seattle. We have our first Starbucks union at a Starbucks location back here in the hometown of Seattle. And I want to bring up another thing that’s interesting, by the way, she mentioned that these things are not bad for business. And she brought up another hometown company, which is kind of the opposite of Starbucks in their approach, which is Costco.
Nick Hanauer:
Yeah.
David Goldstein:
Which has always had a business model in which it paid its workers more and has been very profitable doing that.
Nick Hanauer:
That’s right, and she said she wasn’t sure that they were better guys, but I know those guys and I can tell you with authority that they are better guys. Jeff Brotman and Jim Sinegal, Jeff sadly passed a few years ago, but were two of the most thoughtful, ethical business people in America. They just were unbelievably civically minded and just incredibly fine people. So, it’s not… I don’t think it’s an accident that Costco ended up as an incredibly… by the way, a great place to shop, but also a great place to work.
David Goldstein:
And I want to bring up something else which is really important because I know… You know me, I’m always thinking what the other side is going to say. I’m looking at the propaganda side of this and how are people going to push back. And one of the things they’re going to say is, “This isn’t fair. It’s an outlier. This report covers the period of the Great Recession, this incredibly disruptive, ahistorical moment in history. How can you look at these companies and their ability to live up to this pledge when it happened in this weird, weird moment?” And my pushback to that is, “No, no, no. You got it backwards. The pandemic economy, it was an opportunity to live up to this in a way that the normal economy wouldn’t have allowed them.”
Nick Hanauer:
Correct.
David Goldstein:
This was a unique [crosstalk 00:37:50] opportunity to change your business practices.
Nick Hanauer:
Right, and no one would’ve pushed back in that moment.
David Goldstein:
Right.
Nick Hanauer:
Anyway, it was a great report, but not a surprising report.
David Goldstein:
No, I don’t think… I don’t think if you were looking for the twist, “Then it turns out they did it!”
Nick Hanauer:
Yeah.
David Goldstein:
We all know from reality that things have not gotten better, that our economy has grown even less equal over the past two years than it was before, and that was a hard thing to do, based on what the starting point was.
Speaker 3:
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