Notes to reader:
- Many of the metrics in this second Walmart post were taken from the previous post – see “Walmart, Part One” (https://thequixoticdeacon.com/income-inequality/walmart-part-1). Where new information is used, sources are provided.
- I have used the device of imagining what Peter Gomes might have asked the Walmart Board of Directors. To state the obvious, I don’t purport to know what Gomes would have asked. But his stated concern for those who suffer at the hands of unrestrained capitalism has informed my imagination as to what he might have asked.
- Walmart’s fiscal year ends on January 31st. Thus when I refer to fiscal year 2017, I am referring to the last completed fiscal year which ended on January 31st, 2017.
When we closed our “Walmart, Part One” post, we wondered what Peter Gomes, the distinguished minister and professor at Harvard, might say to the Walmart Board of Directors about compensation equity. Specifically I wrote, “. . . I wonder what he would have to say to the 15 men and women who, collectively, earn $56,377,000 while they employ 1.2 million hourly workers who live below or near the poverty line. Those 15 people include 11 outside Board members, the CEO and his 3 most highly compensated vice presidents.
So let’s imagine that Gomes is sitting across the table from board members and top executives. He wants to understand the rationale behind paying the 15 people in the room $56,377,000 while paying the average full-time hourly employee $27,830 gross per year. Maybe he would ask some of the following questions.
- Mr. McMillon, in the year ended January 31, 2017, you earned over $22,000,000 while your average full-time hourly employee earned $27,830. Is it fair for you to earn 790 times what your average full-time employee earns in the same time period? Is an hour of your time worth 790 times as much as the man or woman working in your stores? Do you realize that in 2016, according to the AFL-CIO, the average CEO of an S&P 500 company earned 347 times as much as the average production worker? Do you realize that you earned at double that rate, i.e., 790 times average worker pay versus 347 times? Do you realize this ratio (347:1 for the average S&P 500 CEO) puts our country far, far ahead of other developed countries in terms of CEO pay? Are you comfortable with those numbers? Are you proud of them?
- Members of the board’s Compensation and Management Development Committee (Ms. Harris, Ms. Mayer, Mr. Reinemund, and Mr. Systrom), when deliberating on the compensation for the CEO, do you consider the average Walmart worker’s annual earnings of $27,830? If so, is there any limit to the ratio of the CEO’s pay to the average worker’s pay (currently 790:1)? If there is a limit, what is it? If you don’t take this ratio into account, why not? Is it necessary to pay Mr. McMillon $22,000,000 in order to retain his services? Would he leave the company if he were paid, say, $12,000,000?
- Board Chair (Mr. Penner), in Walmart’s 2017 annual report we see that Walmart returned $58 billion to shareholders over the past 5 years in dividends and share repurchases. In the same report, you say that Walmart spent $2.7 billion on education, training and higher wages for employees over the past 2 years. In the same document, you reported $31.5 billion in operating cash flow for the last fiscal year. Clearly, you have a thriving business of which you are justly proud. But has the board discussed, from time to time, using any part of the $31.5 billion in annual operating cash flow to accelerate wage increases for hourly associates? Has the board discussed using any part of the $58 billion paid out in dividends and stock repurchases to accelerate wage increases for hourly employees? Over the past five years, Walmart has averaged paying out over $10 billion per year for dividends and share repurchases. Over the past two years Walmart has invested an average of $1.35 billion in education, training and wage increases for associates. What part of the $1.35 billion per year went to wage increases for hourly employees? Has the board discussed whether spending $10 billion a year to benefit shareholders while spending something less than $1.35 billion to increase wages is defensible given the relative poverty of its workforce?
- Board Members, you earn an average of $319,000 per year for serving on Walmart’s board. This is more than 11 times the annual income of the average full-time Walmart worker. On an hourly basis you are compensated at 318 times the average worker rate. Do you believe your time is 318 times more valuable than the average worker at Walmart? How would you explain your pay to the average Walmart hourly worker? Is there any reason, other than “that’s what the free market dictates,” that your hourly pay is $4,255 compared to $13.38 for the average Walmart full-time worker? Are you, as human beings, not as board members, at all unsettled by these questions? Can you identify a specific board member whose primary concern is the welfare of the hourly worker? Yes, I realize that you have a fiduciary responsibility to your shareholders, but do you also have a moral responsibility to the people whose labor enriches you, senior executives, and shareholders? Isn’t it possible for a company as prosperous as Walmart to do the right thing for both shareholders and employees? Do your controlling shareholders, the Walton family, use their influence in any way to raise wages for the hourly worker? Do they use that influence to promote dividend growth and share repurchases?
- Board Member S. Robson Walton, According to Forbes magazine, your personal net worth is approximately $38.3 billion. Your family owns about half of all Walmart shares and receives some $5 billion a year in dividends. Your family is the richest family in the United States and one of the richest on earth. You also are on Walmart’s board of directors; that paid you $268,978 in fiscal 2017. Would you sacrifice some of your Walmart dividends and income from board fees to raise hourly wages for Walmart workers? Do you realize that your family’s annual dividends are sufficient to pay each of the 1.2 million Walmart hourly workers a bonus of over $4,000? As a representative of the Walton family, what message do you have for the hourly worker at Walmart who needs food stamps to make ends meet? Could you, in your powerful position, help that person?
Unfortunately, dear reader, the Quixotic Deacon cannot answer the questions posed in the name of the late Peter Gomes. Since I don’t serve on Walmart’s board and am not a member of the Walton family, those answers are unavailable to me. But I think every Walmart hourly worker would like to hear answers to those questions. Further, I think that any Walmart shareholder who has an ounce of compassion for the working poor would want some answers as well. And, finally, I think many Walmart customers would like to hear how the corporation is working to lift its store level employees – cashiers, salespeople, stockers, etc. – out of poverty. Of course if one’s allegiance is to unfettered free enterprise, as opposed to some notion of justice informed by both Christian and Jewish scripture, you will find the foregoing questions both silly and unwarranted.