The Employee Ownership Update
November 1, 2018
Amazon's New Minimum Wage, Linked to Reduced Stock Compensation, Begins TodayIn October, Amazon announced that, effective November 1, it would increase its minimum wage to $15 per hour, covering 250,000 people, or 40% of its current staff. The move earned praise from, among others, Senator Bernie Sanders, who said, "I urge corporate leaders around the country to follow Mr. Bezos's lead," referring to Amazon's CEO Jeff Bezos.
As part of the minimum wage adjustment, Amazon also said it would eliminate a restricted stock unit program, which provided shares to workers, including warehouse staff.
The New York Times published an extensive article comparing the Amazon restricted stock program to the former stock plan at Sears. Sears contributed 10% of pretax profit, and by the 1950s Sears employees owned a quarter of the company. The article quotes Joseph Blasi of Rutgers University as saying that in the mid-twentieth century "there was a notion that wages were not enough, and workers had a right to share in the fruits of their labor."
The article notes that Amazon "had been awarding two shares a year to warehouse employees, worth about $3,500 at the current price." It interviewed Amazon employees who calculated that their total compensation would decrease. In response to questions about the possibility that the change would decrease compensation for some workers, the Times reported that "Amazon officials said that over the next week they would adjust the pay of some employees to make sure workers did not end up losing money with the changes." The company also said it would create a new share compensation plan in 2019, but did not share any details.
Let Us Know Your Comments on SBA Rules for ESOP Loans by November 27The proposed rules for implementing the Main Street Employee Ownership Act reduce the number of new ESOPs the Act is expected to produce, as we described in our prior update. The NCEO is seeking input from banks that make SBA-guaranteed loans and who might be interesting in submitting a comment this month. Please send any possibilities to Corey Rosen (CRosen@nceo.org) by November 27.
ESOP Association Releases Report on Company Performance186 ESOP companies that are members of The ESOP Association responded to a questionnaire in September 2018 about key measures of their performance. The results, released in its 2018 ESOP Economic Performance Report, include:
- 55% of responding companies make ESOP contributions in the most recent plan year equal to 11% or more of covered payroll; 17% make contributions over 20% of covered payroll.
- 75% of responding companies increased wages for "production and non-supervisory employees" by 3% or more during the prior year.
- 86% say that having an ESOP had a positive effect on their corporate culture, and 95% say implementing the ESOP was a good decision.
- 80% of respondents said that their stock value increased in 2017, versus 12% that saw a decrease.