The rules that shape corporate America incentivize behavior that has led to the economic puzzle we see today: high corporate profits coupled with low and stagnant wages. “Shareholder primacy” is the practice in which corporations prioritize shareholder payouts over productive investment and employee compensation. This way of operating dominates corporate decision-making today, so employees have become a cost center to be squeezed, rather than being treated as stakeholders who should do well when a company does well.
One of the leading corporate examples of shareholder primacy is retail giant Walmart. In her latest issue brief—co-authored with Roosevelt Research Associate Adil Abdela—Roosevelt Senior Economist and Policy Counsel Lenore Palladino describes the effects on Walmart’s labor force if the company were to redirect what it spends on stock buybacks to employee compensation. By ending the practice of stock buybacks and spending $10 billion on increasing wages instead, 1 million low-wage Walmart employees would see an hourly wage increase of over $5.66.
Walmart—as our country’s largest retailer and the largest private employer of women and black and Latinx workers—is a tremendous force in our economy. Today, however, the starting wage its associates earn still falls below the federal poverty line. With over 1 million hourly employees, ending Walmart’s stock buyback program and redirecting those funds toward investments in employee compensation would provide a huge benefit to American workers, families, and our economy at large.
Also published on Medium.