Yesterday, we took note of a Washington Post story about how, as thousands of their employees were filing for unemployment benefits, some companies "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."
While I made sure to post both sides of the argument, I commented:
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.
One MNB reader responded:
Kevin - do you realize that there are millions of us retirees that invested in 401ks, IRAs, etc. for our retirement years. NOW - we use those funds to invest in dividend issuing companies - they are a source of income for us, aka cash flow. YOU want companies to save face and stop issuing dividends to the rich. I am not rich - I spent 43 years in the Supermarket business and am not rich. I need these dividends to supplement my SS and pension.
From another reader:
Without shareholders there would be no employees !! There has to be a business enterprise created by one, multiple, or thousands of shareholders before the enterprise can hire anyone. Employees are very valuable assets for any enterprise as the output of their efforts is what make the enterprise valuable to customers as measured by revenue and should be treated as such. From time to time, maintaining employees can be a priority due to the unique value of their output , but the enterprise exists to return value to shareholders that is measured by the market in the form of the share price. Furloughing employees has a long term impact on the output of the organization and therefore also impacts the value of the enterprise. There is a balance to be found and successful balance will be rewarded by the value determined in the marketplace and businesses that cannot find the right balance will be punished with diminished value to shareholders.
On a personal note, since my retirement, the value of dividends to shareholders of various companies has become particularly important to me.
First of all, to be clear … I am very cognizant of the impact of a down market on retirement. I'm not going to be making that move anytime soon (I hope!), but I am a lot closer to the end of my career than the beginning. (Mrs. Content Guy is even closer.) So I get it.
But … My argument is less about the primary importance of shareholders than it is about what I think should be seen as the significance of employees. I worry that companies that treat their shareholders better than their employees are creating a company culture that ultimately values the wrong things.
I believe fervently in the "officers eat last" philosophy espoused by the US Marines, and that the smartest executives I know apply to their own organizations.
(I know a guy who says that you can immediately size up a company culture by bringing top management and middle management into a room and opening a bunch of pizza boxes. If the C-level execs eat first, there's a problem.)
I also think that the long-term health of a company - including its stock price - is dependent on the health and vitality of its culture, including how it treats employees.
Though I'll concede that short-term stock returns often are based on many of the wrong things.
Yesterday, we also reported on a story from Vice, which had a story about how - to use its headline - "Yelp is Screwing Over Restaurants By Quietly Replacing Their Phone Numbers."
It works this way: "Even though restaurants are capable of taking orders directly—after all, both numbers are routed to the same place—Yelp is pushing customers to Grubhub-owned phone numbers in order to facilitate what Grubhub calls a 'referral fee' of between 15 percent and 20 percent of the order total."
In other words, instead of looking out for its retail clients and their patrons, Yelp is looking out for itself.
I commented:
Read this story … and then think about whether any service provider with which you might be working is looking out for your brand equity (which ought to be its primary job), or looking to build its own business on your back, even if that means laying the foundation to eventually be able to compete with you.
Think about it. Is there any company with which you are working that might fit that description?
Hmmmm?
MNB reader Jeff Weidauer raised his hand:
Ha! Can you say Instacart?
Exactly. Extra credit to Mr. Weidauer.
And MNB reader Mike Slattery wrote:
This should be a cautionary tale for those supermarkets outsourcing delivery. They can’t say you didn’t warn them!
Mrs. Content Guy often suggests that when I get on my soapbox about stuff like this, I sound like I am channeling John the Baptist … and then she reminds me how John the Baptist ended up.
And finally, on another subject, from MNB reader Rich Heiland:
Your observations about your local book store, and how it had 20 years to get its arms around the whole internet and customer service thing, brought to mind a book I first read in 1992 - Michael Gerber’s "Emyth."
To cut to the chase he posited that most small businesses grew not from a desire to have a business or be a business but out of a passion. Someone loved something or someone was good at something (a technician) and so it became a business with zero foundation in business itself.
I suspect your local store was created by someone who passionately loves books, wanted to be immersed in the physical sense of a book - the feel, touch and smell. And wanted to interact with those who shared that passion. I suspect that while the world outside their door sped by, they remained holed up with what they love. Gerber wrote that is the case with a lot of small businesses and while the passion is admirable, it is in the end no way to run a business. Maybe the bookshop owner should read Gerber.
I think you have it exactly right.
One point. While I got an email the day after I placed the order acknowledging it, it now has been several days and nobody has communicated anything about when the book might be available. I'm willing to spend a little more money to patronize a local business, and I';m even willing to wait - but I am unwilling to be kept in the dark. Just talk to me, dammit!
For the record, after I did the video, a friend of mine immediately downloaded the book, "Lincoln on the Verge," onto his iPad and spent $14. Amazon is selling the hardcover (though it is out of stock at the moment) for $18. My local bookstore is selling the hardcover for $35.
I repeat. If stores like this don't survive, it isn't homicide. It is suicide.
