Walmart and the Push to Put Workers on Company Boards
In 2000, Cynthia Murray started working as a fitting-room associate at a Walmart store in Laurel, Maryland, and she still holds the position today. “I take all the calls that come in. I take care of the customers. I do returns,” Murray, who is in her early sixties, told me recently. “I do a little bit of everything in the store. I’m always around the fitting-room area, but sometimes I have to go to customer service, and there are seven departments I separate returns for. If you call the store, I’m the one that you get. If you need a manager, I use a walkie that I have to find one. I help customers if they have issues.” Murray grew up in Pittsburgh, Pennsylvania, and was raised by a single father who drove a truck for a living and was a member of the Teamsters union. After graduating from the South Side High School in Pittsburgh, she did a variety of jobs, including working in the canteen of a steel mill, serving as a home health aide, and driving a truck. When she was first hired at Walmart, Murray worked full time and was paid $7.30 an hour; today she works four days a week and makes $14.68 an hour.
During her nineteen years at Walmart, Murray has seen changes that, she feels, have undermined the long-term health of the company and its workforce. A few years ago, the company modified the way that it gives pay increases to its retail employees, moving from a set annual raise of forty cents an hour to a two-per-cent increase in pay, a change that Murray says has resulted in lower raises for many workers. The company started using a points system to track sick days, which Murray says pressures workers to come to work even if they are running a fever. Waves of layoffs and reductions of shifts over the last decade thinned out staff inside Walmart’s vast emporiums, leading many merchandise shelves to sit empty for long stretches because there was no one available to stock them. In 2016, an article in Bloomberg Businessweek noted elevated crime rates at Walmart locations across the country, which were straining local police departments; the crimes were attributed in large part to cuts in staffing at stores. (Last year, Walmart announced that it was raising the minimum wage it pays employees, to eleven dollars an hour; this past February, when it introduced the changes to its sick-day policy, it also said that it was offering bonuses to workers who minimize their absences from work.)
Murray believes that some of the changes are based on short-sighted decisions that have undermined the company’s competitiveness and made it more vulnerable to online retailers, such as Amazon. The practice of constantly cutting costs and squeezing workers often stems from the short-term-profit-oriented mind-set that has come to dominate corporate America over recent decades, in which moves to boost a company’s stock price are given priority over longer-term investments in infrastructure and employees. Murray believes that, if there had been a meaningful number of people with a stake in Walmart’s longer-term health—such as store associates—involved in the business decisions, some of these changes wouldn’t have happened, and the company would be better off. This led Murray, with the help of a worker’s-rights organization called United for Respect, to join in drafting a resolution that she plans to present to Congress on Tuesday—and, later, at Walmart’s annual shareholders’ meeting—urging the company to place a significant number of hourly retail employees on its board of directors so that they might have input on major corporate decisions.
Placing workers on a company’s board has never been a common practice in the United States. But with widening income and wealth inequality, and an economic recovery that has not brought significant increases in wages to average workers, experts are starting to look farther afield for possible ways to alleviate the disparity. Several shocking recent statistics have helped underscore the idea that the way that the rewards of the economy are being distributed is badly off balance. Between 2008 and 2017, the largest American companies spent more than ninety per cent of their corporate profits on stock buybacks and dividends, which primarily serve to drive up stock prices and enrich shareholders. A recent analysis in the Wall Street Journal showed that the median pay for a C.E.O. of an S. & P. 500 company rose to a million dollars per month in 2018, driven by tax cuts and healthy corporate profits, while the average worker’s wages grew by just three and a half per cent. The ratio of what the average chief executive and the average worker are paid sits at approximately two hundred and seventy-three to one.
One reason for this, many economists believe, is that those running major companies have been left unchecked to direct the vast majority of a company’s earnings to themselves, by giving dividends to shareholders and enormous pay packages to top executives (the two groups often overlap) at the expense of investment in innovation, infrastructure, hiring, and wages. The only way to reverse this trend is to rethink the way that companies are managed and regulated, which has become a growing topic of discussion among policymakers. Senators Elizabeth Warren and Bernie Sanders have both suggested legislative changes that would curtail the ability of companies to spend lavishly on C.E.O. pay and stock buybacks without first investing in their companies and workers. When Cynthia Murray presents her Walmart shareholder resolution before Congress, she’ll be doing so at a hearing arranged by Senator Tammy Baldwin, of Wisconsin, who is reintroducing legislation called the Reward Work Act, which would require companies to allow workers to elect a third of the company’s board members.
Baldwin told me that, as she watched the economy slowly recover after the 2008 financial crisis—she was in the House of Representatives when the crash happened—she kept noticing that many families in Wisconsin who had lost jobs or homes did not seem to be getting back on their feet. In some ways, it seemed that they were having an even harder time than before. When she and her staff began to study potential reasons for the discrepancy, it seemed that corporate decisions were a big part of it. “When you’re spending ninety-five per cent of your profits on stock buybacks and dividends, you are not investing in your workers,” Baldwin said. “You’re not giving them raises. You’re not retraining them, as you make advancements. You’re probably not even making advancements, because you’re not buying new equipment or engaging in research and development to make your company relevant to keep up with the market. You’re essentially putting all your proceeds in financial paper.” She mentioned that, in 2018, a consumer-goods company called Kimberly-Clark, which makes Kleenex tissues and Huggies diapers, announced that it was using the proceeds from the Trump Administration’s corporate tax cut to increase its dividend payments and to buy back up to nine hundred million dollars of its own stock. At the same time, it announced that it was cutting at least five thousand jobs and closing or selling ten manufacturing plants. Baldwin noted that it wasn’t always obvious from the headlines that choices about a company’s board of directors and its dividend plans and buybacks were directly connected to the challenges faced by middle- and working-class families—but that once you started paying closer attention, the links became clear. “I almost think it’s impossible not to connect the dots,” she said. “This is, in my mind, just an enormous issue.”
Because workers have so rarely been invited to participate in board-level decisions at companies in the U.S., there are few domestic examples to look to for a sense of how it would play out. In Germany and a handful of other European countries, however, having worker representation on boards is required. Baldwin’s office found research that showed that companies with worker representation invest twice as much in their businesses as those without; wages are higher, and profits are distributed more evenly. These firms also performed better. None of this is surprising. Low-level employees are deeply invested in a company’s long-term success, because their families depend on it in ways that top executives waiting for a bonus may not.
Some academics and economists argue that it would also benefit the economy as a whole. Robert Hockett, a law professor at Cornell Law School who has advised Bernie Sanders and Elizabeth Warren on economic policy, told me that creating a financially stable, thriving middle class would create more demand for the products that American companies make and sell. It would also decrease the likelihood that American consumers will rack up unsustainable amounts of credit-card and mortgage debt, which led directly to the last economic meltdown. It could even help stabilize our politics. “We had this long history where every generation did better than its predecessor generation,” Hockett told me. “That expectation, it’s part of the American Dream—not just that you have a decent job that allows you to raise a family but that every generation was rendered a bit better off, materially, than the generation that preceded it. The millennials are the first in our hundred and fifty to two hundred years who are not expected to do better. That’s a real shock, and it accounts for why Trump was able to win in 2016, because he made it appear that he was listening to these people.”
When I asked Senator Baldwin whether she felt optimistic about making such profound changes in the face of so many discouraging trends, she said that she did. “It feels like we may be in a moment where we’re lifting the curtain and showing people what’s really happening,” she said. “I’m hoping that we’ll be able to show in really clear terms what’s really been going on in the economy: the short-termism and the financialization of important industries. We’ll help people understand the full picture.”