Business Leaders Agree: Inequality Hurts The Bottom Line
Above Photo: Joe Rawlinson / Flickr
A growing number of corporate leaders say it’s time for them to start sharing the wealth.
For decades, big business leaders have warned that redistributing wealth is bad for business. Taxing the rich to pay for infrastructure and education, they say, will kill the goose that lays the golden egg.
But what if it’s the opposite? What if decades of stagnant wages and growing inequality are scrambling the golden egg and stifling the economy?
A growing body of research suggests that’s exactly what’s happening. And a growing number of business leaders now agree.
Jim Sinegal, the retired CEO of Costco, famously fended off Wall Street pressure to cut wages and made an eloquent case for a higher federal minimum wage. “The more people make, the better lives they’re going to have and the better consumers they’re going to be,” Sinegal told the Washington Post years ago.
“Our country needs less inequality and more opportunity,” agreed former Stride Rite CEO Arnold Hiatt in 2015. “Instead, we’re moving toward a society that will be economically and politically dominated by the sons and daughters of the Forbes 400.”
One of the clearest voices on the business risks of growing inequality is Peter Georgescu, a retired ad man from one of the world’s largest marketing firms. His new book, Capitalists Arise: End Economic Inequality, Grow the Middle Class, Heal the Nation, is a stinging indictment of the way business has been done in our country.
“For the past four decades, capitalism has been slowly committing suicide,” he writes — especially shareholder capitalism, where businesses operate for the benefit of shareholders and no one else.
“Shareholder primacy has become a kind of cancer that needs to be eradicated before it destroys our way of life,” Georgescu warns.
Those views were recently echoed in a letter written to CEOs by Larry Fink, chairman of the investing giant Blackrock.
In January, Fink called on the companies Blackrock invests in to “understand the societal impact of your business as well as the ways that broad, structural trends — from slow wage growth to rising automation to climate change — affect your potential for growth.”
Businesses, Fink exhorted, need a social purpose other than making money.
Reversing inequality will require robust government action at all levels. This includes boosting the minimum wage, fairly taxing big businesses and the rich, and making robust public investments in education, infrastructure, and individual opportunity.
We also need government to crack down on wage theft and discrimination, and to protect the right to organize. Unions and activists have demanded these changes for years.
So what can supportive businesses do? Everything.
They can encourage more employees to be owners. Employees already have an ownership stake at companies such as Publix supermarkets and Southwest Airlines.
They can raise their wage floor to close the monstrous pay gap between top management and average workers — a policy long supported by business guru Peter Drucker. And they can publicly speak out in favor of policies that reduce inequality.
If nothing else, they can stop paying dues to business associations that lobby against sensible taxes and labor protections — like the U.S. Chamber of Commerce and the National Federation of Independent Businesses, which tend to be much more conservative than their members.
Can more business leaders “wake up and take action,” Georgescu challenges? Or will they “continue doing business the ways it’s been done… until the whole system risks falling apart?”
Corporate leaders should stand with ordinary Americans to push for serious public policy to halt the nation’s slide towards greater inequality.