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From this morning's Washington Post:

"Since the coronavirus pandemic was declared, Caterpillar has suspended operations at two plants and a foundry, Levi Strauss has closed stores, and toolmaker Stanley Black & Decker has been planning layoffs and furloughs.

Steelcase, an office furniture manufacturer, and World Wrestling Entertainment have also shed employees.

"And as thousands of their workers were filing for unemployment benefits, these companies also rewarded their shareholders with more than $700 million in cash dividends. They are not alone. As the pandemic squeezes big companies, executives are making decisions about who will bear the brunt of the sacrifices, and in at least some cases, workers have been the first to lose, even as shareholders continue to collect.

"Executives say the layoffs support the long-term health of their companies, and often the executives are giving up a piece of their salaries. Furloughed workers can apply for unemployment benefits. But distributing millions of dollars to shareholders while leaving many workers without a paycheck is unfair, critics argue, and belies the repeated statements from executives about their concern for employees’ welfare during the coronavirus crisis."

Here are two perspective son the practice from the Post story.

•  "'There are no hard-and-fast rules about this,' said Amy Borrus, deputy director of the Council of Institutional Investors, a group that argues for shareholder rights and represents pension funds and other long-term investors.

"Many large U.S. companies choose to issue a regular, quarterly dividend to shareholders, often increasing it, and they boast about these payments because they help keep the share price higher than it might otherwise be. Those companies might be reluctant to announce that they are cutting or suspending their dividend during a crisis, Borrus said."

However, Borrus concedes that companies need to be careful about the optics.

•  "William Lazonick, an emeritus economics professor at the University of Massachusetts at Lowell, has been one of the leading critics of companies that distribute cash to shareholders through stock buybacks and dividends rather than reinvesting the profits into employees, innovation and production. For companies that are continuing to do buybacks and issue dividends during the crisis, he said, it is business as usual. The lion’s share of dividends goes to higher-income Americans, according to data from the Internal Revenue Service: about 69 percent of all dividends goes to taxpayers with incomes in excess of $200,000.

"'In a downturn like this, the first thing a company should do is give up any distributions to shareholders,' Lazonick said. 'But in a crisis, companies will differ. Some will care … and some will rob the workers, who should expect that their continued employment will be the company’s first concern'."

KC's View:

The Post story reminds us of how it was just last August that the Business Roundtable issued a statement saying that the CEOs who are members no longer believed that companies primarily exist to serve shareholders, but rather need to serve all stakeholders, including employees, suppliers and customers.

But, the Post writes, "of the chief executives who endorsed the Business Roundtable statement, at least three of their companies are among those that have implemented at least some furloughs while also issuing dividends: Caterpillar, Stanley Black & Decker and Steelcase."

I get that CEOs have a fiduciary responsibility to their companies, and most view shareholder care as being a significant part of that.  But I think the optics on this really are lousy, and it is at least possible that companies putting shareholders first may face some backlash … especially if we end up finding out that they've taken taxpayer money during the crisis but still put shareholders' interests first.

And, I think it is possible that they are not serving the long-term interests of their companies.