Instead of Enriching Shareholders, These Companies Could Give 8 Million Workers a $46,000 Raise

How public companies like Nike and Apple are shifting money away from workers to the already very wealthy.

Colleen Boyle February 4, 2019

Nike president and CEO Mark Parker speaking an event in New York on March 16, 2016. (JEWEL SAMAD/AFP/Getty Images)

Dur­ing the most recent fis­cal year, the 30 com­pa­nies that make up the Dow Jones Indus­tri­al Aver­age gave $378.5 bil­lion to share­hold­ers. That trans­lates to more than $46,000 for each of their com­bined 8 mil­lion employees.

If you work for any of these companies, management is choosing to pay you far less than they could.

Pub­licly trad­ed com­pa­nies — like Nike, Coca-Cola and Apple — have many options for how to spend their prof­its. His­tor­i­cal­ly, com­pa­nies spent their prof­its rein­vest­ing in their busi­ness through research and devel­op­ment, merg­ers and acqui­si­tions, cap­i­tal expen­di­tures, and work­force train­ing and increased salaries. Today, cor­po­ra­tions are spend­ing the major­i­ty of their prof­its on share repur­chas­es and div­i­dends, which enrich exec­u­tives and share­hold­ers while stiff­ing workers.

When com­pa­nies repur­chase shares, the stock price often goes up, which investors like, and which pri­or to SEC rule changes in 1982 was viewed as ille­gal price manip­u­la­tion. In addi­tion, earn­ings per share increase, a met­ric that is often used to deter­mine exec­u­tive bonus­es. The rise in the stock price at the time share buy­back pro­grams are announced allows exec­u­tives to sell their shares and prof­it from their own actions. Research con­duct­ed by Secu­ri­ties and Exchange Com­mis­sion­er Robert J. Jack­son, Jr. found alarm­ing evi­dence of cor­po­rate exec­u­tives using share repur­chas­es to sell their own stock, putting more com­pa­ny mon­ey into their own pockets. 

In 1982, the Secu­ri­ties and Exchange Com­mis­sion issued a rule that sets con­di­tions under which pub­licly-trad­ed com­pa­nies can repur­chase shares with­out being in vio­la­tion of anti-fraud pro­vi­sions. Since then, share repur­chas­es have steadi­ly risen, from aver­ag­ing 4 per­cent of cor­po­rate net income in 1983, to 27 per­cent by 1986, and 50 per­cent from 2007 to 2016. Com­bined with div­i­dends, cor­po­ra­tions spent 92 per­cent of net prof­its on share­hold­er pay­ments between 2007 and 2016.

Mean­while, real aver­age hourly wages in 2018 are the same as they were in 1978

If you work for any of these com­pa­nies, man­age­ment is choos­ing to pay you far less than they could. Instead, man­age­ment is shift­ing more mon­ey to the already very wealthy. The rich­est 10 per­cent of Amer­i­cans own 84 per­cent of the val­ue of shares of stock. The Nation­al Insti­tute on Retire­ment Secu­ri­ty found that 57 per­cent of work­ing-age adults — over 100 mil­lion peo­ple — do not have any retire­ment account assets, and for peo­ple with retire­ment accounts, the medi­an account bal­ance is $0.

In their most recent full fis­cal years, 27 out of the 30 com­pa­nies that make up the Dow Jones Indus­tri­al Aver­age repur­chased shares, spend­ing a com­bined $220.3 bil­lion. All 30 com­pa­nies issued div­i­dends total­ing $158.2 billion. 

With those pay­ments to share­hold­ers, Amer­i­can Express, Chevron, Cis­co, Exxon Mobile, Gold­man Sachs, Home Depot, John­son & John­son, JP Mor­gan Chase, Mer­ck, Microsoft, Pfiz­er and Proc­ter and Gam­ble all could have dou­bled work­er pay.

For exam­ple, Home Depot employed 413,000 work­ers through­out North Amer­i­ca, pay­ing a medi­an wage of $21,095, which was below the U.S. pover­ty line for a fam­i­ly of four in 2017. But it paid share­hold­ers $12.2 bil­lion, or $29,540 per work­er. Home Depot could have dou­bled worker’s wages and still giv­en almost $3.5 bil­lion to shareholders. 

Nike, Coca-Cola and Visa each could have quadru­pled the pay of their medi­an employ­ee with the cash they sent to share­hold­ers. Nike paid a medi­an wage of $24,955, which is under the pover­ty thresh­old for a fam­i­ly of four, but spent $58,194 per work­er on share repur­chas­es and $17,004 per work­er on div­i­dends. Coca-Cola paid a medi­an wage of $47,312 but gave share­hold­ers $162,136 per employ­ee. Visa’s medi­an wage was a healthy $132,483, but it gave share­hold­ers $535,882 per worker.

B­­y far the worst exam­ple was Apple. For its fis­cal year that end­ed Sep­tem­ber 29, 2018, Apple spent an incred­i­ble $72.7 bil­lion repur­chas­ing shares and dis­trib­uted anoth­er $13.7 bil­lion in div­i­dends. Apple’s medi­an wage was $55,426, while it gave share­hold­ers $654,924 per work­er, more than 11 times the medi­an wage of their 132,000 employees.

It’s dif­fi­cult to quan­ti­fy the econ­o­my-wide impact of this shift in wealth. In 2017, the U.S. medi­an house­hold income was $61,372. Medi­an income for men was $44,408 and medi­an income for women was $31,610. Imag­ine if sev­er­al mil­lion work­ers had an extra $10,000 a year to spend on their fam­i­lies. Or $20,000. Or $100,000. Much of that mon­ey would cir­cu­late in local economies rather than sit­ting in a small num­ber of invest­ment accounts.

Even if stock buy­backs are curbed, as leg­is­la­tion intro­duced by Sen­a­tor Tam­my Bald­win (D‑WI) aims to do, work­er wages can still be divert­ed to div­i­dend pay­ments, or com­pa­nies can sim­ply sit on piles of cash, as many have been doing. The Reward Work Act also pro­pos­es that work­ers pick one third of the boards of pub­licly trad­ed com­pa­nies, which would attempt to address one root cause of the prob­lem: most work­ers have very lit­tle say in what hap­pens to the wealth their labor creates.

A bet­ter solu­tion would be to make it eas­i­er for work­ers to join a union. It’s not sur­pris­ing that income inequal­i­ty has risen as pri­vate sec­tor union­iza­tion has dropped. Unions give work­ers a seat at the table to nego­ti­ate how a company’s prof­its are spent. Right now, with pri­vate sec­tor union­iza­tion at one of its low­est points over the last 100 years, there’s no check on cor­po­ra­tions fur­ther enrich­ing the wealthy at the expense of their workforce.

The chart below looks at the most recent fis­cal year of all 30 com­pa­nies that make up the Dow Jones Indus­tri­al Aver­age. The analy­sis, for the most part, doesn’t reflect the high­er share repur­chas­es expect­ed to be report­ed for 2018 due to cor­po­rate tax cuts. 

Note: The data is for the most recent fis­cal year report­ed on each company’s Form 10‑K and Proxy State­ment. The medi­an work­er pay for each com­pa­ny is what was report­ed in the most recent Proxy State­ment as is now required by the Dodd-Frank finan­cial reform act. There are some lim­i­ta­tions to using this fig­ure: Com­pa­nies include in their cal­cu­la­tion work­ers from around the world and both full- and part-time work­ers, and com­pa­nies can include the val­ue of employ­er pro­vid­ed health insur­ance and retire­ment benefits.

Colleen Boyle is a union researcher and organizer.
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