Dear Davos Attendees,
The theme of your annual meeting this year is “Stakeholders for a Cohesive and Sustainable World.” Another way of putting this might be “For too long we’ve focused on how to make as much money as possible at the expense of society and the planet, and now that harm is coming back to bite us, so we should figure out how to make things right.”
Based on the coverage I’ve read so far this week, it seems like you’re doing a great job of talking about these issues. But what are you actually going to do about them?
60 companies paid $0 in federal taxes
At a panel discussion on the first day of the conference, Salesforce CEO and billionaire Marc Benioff declared “Capitalism as we have known it is dead. This obsession that we have with maximizing profits for shareholders alone has led to incredible inequality and a planetary emergency.” He’s right. Consider some of the stats:
- The world’s 2,153 billionaires (that’s you!) own more wealth than roughly 60% of the global population (4.6 billion people).
- 60 Fortune 500 companies–including Amazon, Netflix, and, yes, Salesforce–paid $0 in federal taxes in 2018.
- CEO compensation has grown 940% since 1978. In the same time frame, typical worker pay has increased just 12%.
- According to the US Census Bureau, income inequality is the highest it’s been in 50 years (since data has been available).
Benioff then went on to make the case for “stakeholder capitalism,” which considers the needs of groups who are affected by a company’s actions–employees, customers, communities, the environment–but don’t always benefit from its financial success. He was joined by Bank of America CEO Brian Moynihan and Siemens chairman Jim Snabe, who talked about how their companies were working to develop metrics to help measure their progress. “We are very good at measuring shareholder value,” Snabe said. “If we want to go to stakeholder capitalism, we do need to measure the value that we can create for all stakeholders.”
At some point, you have to act
It’s important to talk about these things. And for a large company, it makes sense to try and measure your impact. But talking about solving problems doesn’t actually solve problems. At some point, you have to act–even if it’s risky or even if you don’t have the proper metrics in place. Trust me, I’ve done it.
In 2015, I was earning $1.1 million a year as CEO of my company. My lowest-paid employee was earning $34,000, and about a third of my employees were earning less than $50,000. In the grand scheme of CEO pay ratios, mine wasn’t terrible–only 33 times higher instead of the average 260-300 times higher for CEOs at larger companies. Still, I realized that earning so much money when many of my employees were barely able to afford the cost of living in Seattle (where we’re based) was actively harming them. How much, I couldn’t say for certain. But I knew through my own experiences and research that the stress of having to worry about money can inflict immense damage on one’s health and well-being. I didn’t need an algorithm or metric or panel of billionaires to tell me what I needed to do.
Gravity customers get better service
I cut my salary to $70,000 a year and put a policy into place whereby all current and future employees would earn a minimum salary of $70,000 a year. It was scary, and it made us less profitable for a while, and a couple of employees and customers left because they didn’t like the idea of paying traditionally low-paid workers such a high starting salary. But, overall, it had a tremendous positive impact on our employees. I haven’t figured out the perfect way to measure this impact, but since you love data points, here are a few:
- Since the policy went into effect, the number of babies born to our employees each year has increased by roughly 400 percent per year, despite the headcount growing by just 75 percent.
- More than 10 percent of employees have purchased a house for the first time.
- Personal individual 401(k) contributions have more than doubled.
- More than 70 percent of those at the company with debt have been able to pay it down, with over one-third of them paying off over 50 percent of their total debt.
The new wage policy also affected other stakeholders. Since sales reps don’t earn commissions and customer support reps are paid enough that they don’t have to stress about money, customers benefit from better service. Several employees were able to move closer to work, which cuts down on commuting time and helps the environment. And because they have disposable income, employees are able to patronize small businesses and “vote with their dollars,” which helps strengthen our community.
Through all of this, we have become stronger and more sustainable as a company. Our customer base has nearly doubled and processing volume (a measure of growth in the payments industry) has tripled.
Imagine what a roomful of billionaires could do
I am one CEO, and we are only one company. I don’t pretend that our policy is perfect, nor do I believe that every company must have a $70,000 minimum wage in order to make the world more equitable. But if a 200-person company with a couple million dollars in annual profit can make a difference through one swift, straightforward, action, imagine what a roomful of billionaires could do. You have the resources. You have the talent. You have the power. All you need is a little imagination and the will to sacrifice your short-term quest for profits in favor of a more sustainable and prosperous future for everyone. Will you do it?
Dan Price, CEO of Gravity Payments
Gravity CEO Dan Price writes frequently on American business.