Big business shouldn’t overlook working stiffs5/21/2019
I’m a sucker for happy news.
There never is enough of it. Often it seems as if discouraging news overshadows anything uplifting or encouraging.
But there was an amazing good-news moment Sunday.
It came during the commencement ceremony in Atlanta at the historically black Morehouse College, a school whose most notable graduate is the Rev. Martin Luther King Jr.
Many of us cannot remember who spoke at our own high school or college graduations. But the nearly 400 members of the Morehouse class of 2019 will remember theirs.
He was Robert F. Smith, the phenomenally successful founder of Vista Equity Partners, a technology investment company. He is worth about $5 billion.
Smith grew up in a family that emphasized education. His observations about his early schooling were the stuff commencement addresses typically are built around.
But then Smith dropped some surprising news on the Morehouse graduates, their relatives and college officials: He said he was going to pay all of the new grads’ student loans.
Each year at Morehouse costs about $48,000, so his promise is estimated to cost him upwards of $40 million.
Smith told the students they need to understand what he expects from them as part of his gift. Freed of having to repay student loans, he wants them to look for ways they can help others in the future.
“Success has many parents,” he said, “and hard as each of you has worked to achieve what you all have achieved today, you’ve had a lot of help along the way. We are the products of a community, a village, a team.”
It’s too bad some of the nation’s top corporate executives were not in the audience Sunday. People like Robert Iger, the CEO at Walt Disney Co., would have benefited from hearing Smith.
Iger is emblematic of the growing divide between what America’s working stiffs are paid and what corporate executives receive.
A study by the Economic Policy Institute found that during the 40 years between 1978 and 2017, CEO compensation rose 1,000 percent after factoring for the effects of inflation. The stock market, by contrast, rose 630 percent after accounting for inflation. But the typical U.S. worker’s salary increased only 11.2 percent during those 40 years after adjusting for inflation.
Put another way, CEOs of America’s largest corporations had incomes in 1965 that were equal to the combined pay of about 20 typical employees. Now, that is about 300 workers. In Iger’s case, however, his compensation equals the combined wages of 1,400 typical employees.
His compensation last year was $65.6 million. It takes Iger about 90 minutes to “earn” what the typical Disney employee earns for a full year’s labor.
That does not set well with one of his shareholders, Abigail Disney, who recently called Iger’s compensation “insane.”
She is the granddaughter of Walt Disney’s brother, Roy. Together, the Disney brothers founded the company in 1923.
Abigail Disney said last month, “Pointing out the incongruity of pay at the top and pay at the bottom provokes a reaction because it so violates our innate sense of fairness it is impossible not to wince.”
When companies are successful, they should reward not just the corporate executives, she said. They should reward the employees who do the day to day work that contributes in many important ways to a company’s success. That reward should be in the form of raises, not one-time bonuses.
“What on earth would be wrong with shifting some of the profits — the fruits of these employees’ labor — to some folks other than those at the top?” Disney asked.
Shifting half of Iger’s compensation to the lower tier employees would raise the pay for 50,000 workers by about $750 annually, she said. Add in half the bonuses paid to the rest of the upper tier executives, and there would be a dramatic change in the living conditions for Disney employees who now live at or below the poverty line.
Walt Disney Co. celebrated President Trump’s signing the federal income tax cuts in 2017 by giving $1,000 bonuses to 125,000 employees. Abigail Disney pointed out those bonuses cost the company $125 million. But Iger and the board of directors spent $3.6 billion of the company’s tax windfall buying up shares of Disney stock — which, in turn, raised the value of that stock.
It’s important to note that a key factor the directors weighed in setting Iger’s compensation was the rising value of Disney stock.
The lower level employees whose labor is necessary for the Walt Disney Co. to conduct its business — the janitors, the housekeepers, the groundskeepers — “deserve to be paid what they need to conduct their lives successfully,” Abigail Disney said.
“Anyone who contributes to the success of a profitable company and who works full time should not go hungry, should not have to ration insulin, and should not have to sleep in a car,” she said.
Her message for Iger and the company’s board of directors was a blunt version of what Robert Smith told the Morehouse graduates on Sunday: “Hard as each of you has worked to achieve what you all have achieved today, you’ve had a lot of help along the way.”
Corporate America would be smart to remember Smith’s message, and Abigail Disney’s, too. ♦
Randy Evans can be reached at DMRevans2810@gmail.com.