Corporate Titans Push for New Governance Standards—How Big a Deal Is This?

Corporate Titans Push for New Governance Standards—How Big a Deal Is This?

A group of prominent CEOs and heads of major institutional investment funds, including Berkshire Hathaway’s Warren Buffett, General Motors’ Mary Barra, and JPMorgan Chase’s Jamie Dimon, have issued an open letter calling for an overhaul in corporate governance principles, along with a detailed set of guidelines for how to achieve that. Jena McGregor outlines their proposals at the Washington Post:

Among the more notable recommendations: The group said in the guidelines that “dual class” share structures, which are often found in founder-led companies and give select stockholders outsize voting power, are “not a best practice.” It called for director compensation to be made up of a “substantial” portion of company stock, suggesting 50 percent or more, to keep goals of directors in line with those of investors. It made a statement in support of board diversity, and said companies should maintain “clawback provisions,” which allow them to recoup compensation given to executives in the event of earnings restatements.

It also said companies “should not feel obligated to provide earnings guidance – and should determine whether providing such guidance for shareholders does more harm than good,” warning against the game of trying to beat expectations provided to Wall Street: “Making short-term decisions to beat guidance (or any performance benchmark) is likely to be value destructive in the long run.”

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Compensation Is a Great Attractor—Just Don’t Think It’s All That Matters

Compensation Is a Great Attractor—Just Don’t Think It’s All That Matters

Suzanne Lucas at Inc. is encouraged by the trend of major employers voluntarily raising the minimum wage for their lowest-level employees, including this week’s announcements from JPMorgan Chase and Starbucks:

The reality is, when you raise wages you get a better talent pool. Years ago (1999-2000), I worked for a retail organization that is always on Fortune’s Top 100 Companies to Work for: Wegmans. I focused on making sure we paid our employees more than all our competitors. While former CEO Bob Wegman was a truly good boss (I have nothing but praise for him), he also recognized that he got the best employees when he paid the best wages.

Wages can rise and fall without government intervention. Companies compete with each other for talent. And raising wages at one big company can have a ripple effect on other companies. That’s how the free market works. When Walmart raised wages back in 2015, TJ Maxx and other stores followed suit. Why? It’s not nobility. It’s simple economics.

If Walmart pays $10 an hour and its competitor pays $9, who would want to work at the competitor? Well, some people would because they like the work better, but you’d see people fighting for the higher-paying jobs and the lower-paying companies would have both increased turnover and a limited employment pool–as the only people available would be those who were incapable of obtaining a higher-paying job. Turnover is a lot more expensive than a pay increase.

In the case of JPMorgan Chase, however, Harvard Business Review associate editor Walter Frick argues that CEO Jamie Dimon’s move could actually end up hurting the bank’s image if the public views it as hypocritical:

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JPMorgan Chase Raises Minimum Wage

JPMorgan Chase Raises Minimum Wage

In a New York Times op-ed published on Tuesday, JPMorgan Chase CEO Jamie Dimon revealed that the bank would raise the minimum wage of its retail banking employees from $10.15 today to between $12 and $16.50, “depending on geographic and market factors,” over the next three years:

A pay increase is the right thing to do. Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives. Above all, it enables more people to begin to share in the rewards of economic growth. And it’s good for our company, helping us attract and retain talented people in a competitive environment. While businesses, including ours, are understandably cautious when it comes to expenses, there are good expenses (investments that will pay off in the long run) and bad expenses (waste and inefficiencies). We have never hesitated to invest aggressively if we thought it would improve our long-term prospects.

While a higher wage is important, so are benefits. Our lower-compensated employees receive a medical plan — subsidized up to 90 percent by the company — as well as dental, vision and other coverage. Many of these and other benefits, including a 401(k), pension, a special annual award, paid family leave, paid vacation and bereavement, have been increased in recent years. In total, the annualized value of all of our benefits for these employees is on average approximately $11,000 a year above their existing wages.

It is true that some businesses cannot afford to raise wages right now. But every business can do its part through whatever ways work best for it and its community.

Dimon’s announcement comes as other large employers are moving to raise wages for their lowest-paid staff.

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