business news in context, analysis with attitude

Yesterday, we had an email from an MNB user who talked about the importance of paying people enough money so they could afford to spend it in ways that would help drive the economy. In part, that email said:

“Doing the simple math, if more people made a livable wage, there would be less need for government assistance programs and more people paying their taxes.  Even our most conservative friends can't argue with this logic!"

Which led another MNB user to write:

This is the kind of “simple math” that keeps me awake at night worried about where this country is going and where our priorities lie. Let’s put this into proper perspective. We’re talking about Apple Store. This is a job meant for TEENAGERS. Someone please explain to me what exactly is a livable wage for someone who has no real financial obligations in the world??? And if you’re complaining about how little Apple pays you, I better dang well not see you carrying around an iPod or iPad, which are total luxury items and not needed to live a life in this country.

Please don’t give me that argument that people are trying to support families. If you have three kids to support and you are working at an Apple Store (or comparable retail outlet) that’s a YOU problem, not a ME problem. You could be in dire straights because your real day job let you go, and that’s legitimate, but far more likely is that you’ve made some horrible personal decisions in your life which has led to your poor position in life.

I have a real problem with this point of view. As far as I am concerned, there is very little that is proper about this perspective.

First of all, it suggests that the writer has never been in an Apple Store, or did not pay attention while in one. At most of the Apple Stores where I've been, there is a real mix of employees. My daughter got a new laptop when she graduated from high school, and the fellow who took care of us was named Mac, and he had to be several years older than me. When I recently was at the Genius Bar, I was taken care of by a guy in his thirties who is married with three kids. (He also has another job.)

I'm not saying that the Apple Store has to pay its employees enough so that they can live in the lap of luxury. (By the way, the get discounts on iPods and iPads, so let's not be too harsh about judging them for owning one or both. Besides, if they are in the business of selling them, shouldn't they also be owners so they can be better at their jobs?) But I do think it is a fair point to suggest that if the average Apple Store employee is generating around a half-million dollars a year in sales - and some of them probably much more than that - then they ought to be paid in a way that reflect their contribution to the organization.

You write about Apple Store employees as if they are behind a counter saying, "Do you want fries with that?"

Wait a minute. Let me go back for a second ... because, in fact, here is no shame in having a job in which one says, "Do you want fries with that?"

What is contemptible, in my humble opinion, is to hold such people in low esteem.

Despite what you say about how a person trying to support himself or herself by working in the Apple Store probably has made bad life decisions, I'd like to suggest that there is nothing further from the truth. Since when did working in retail become synonymous with having a poor position in life? I grew up working in a small men's clothing store where most of the employees were guys supporting families, raising children, being productive workers and members of the community. They weren't getting rich, but they were making a living and being paid a decent wage - and were the public faces of the company that owned the store. They were on the front lines. They were the people responsible of making sure that the clothes fit, that they were correctly altered, delivered on time, and that the customers had a positive shopping experience.

In a retail business, this is the most important job. And hardly deserving of contempt and relegation to the "made poor personal decisions" file.

We can have a legitimate discussion about what is fair and commensurate pay. That seems entirely reasonable to me. We can also talk about whether Apple - or any other retailing entity, for that matter - puts enough emphasis on its front line personnel, versus the folks back at headquarters. (I still love Feargal Quinn's decision to refer to this building as the "support office," reasoning that the people there were charged with supporting the stores, not the other way around. And, if you called it headquarters, you paid a small fine.)

But holding people who work in retail in such low esteem is something that I find extremely troubling. (You really got my Irish up on this one...)

MNB took note yesterday of a Wall Street Journal report that the nation's senior corporate executives are ready to do battle with a provision of the 2010 Dodd-Frank financial legislation requiring public companies "to disclose the gap between what they pay their CEO and their median pay for employees, a potentially embarrassing figure that many companies would like to keep private."

I observed, in part:

I have no doubt that such information will be used as a political cudgel, but that doesn't mean that it won't be a useful tool for investors. On the contrary, this is a piece of information that could be hugely persuasive to some investors. Not all, but some. And I think that coming after a time when a lot of highly paid executives managed to walk away from failing companies with huge pay packages, even as a lot of people who worked for them lost their jobs, this seems like a reasonable piece of information to put front and center.

Not to say that every company should have the same metrics, nor that I would never invest in a company with a big disparity. But I'd like to know. It would tell me something.

MNB user Bobby Martyna responded:

I think there are a few people who would invest (or not) based on the pay ratio alone. What would be much more interesting to investors is the correlation between the pay ratio and performance.  If it turns out that companies with a higher pay ratio (CEOs make much more than the average worker) perform better (using some standard metric like EPS or FCF), then investors will take note, and place their money accordingly.  In that scenario, the rule backfires on the Dodd/Frank supporters.  On the other hand, if companies with a lower pay ratio perform better, then firms with a higher pay ratio could be pressured into reducing the difference.  In the latter case, it would be interesting to see if these companies would lower the CEO pay, increase the average pay, or both -- and then to observe the changes in company performance over time.

And MNB user Chris Weisert wrote:

Another way to consider the implications of publishing this type of information is how it will impact a bright young up and comers’ decision when looking to go to work for a company. I would imagine those with the larger disparity might not get the highest quality applicants for any given position.

Damn right.

This actually is an extension of the Apple Store pay discussion.

There are too many companies out there where the folks in the executive suites think they walk on water, and don't worry about whether the people on the front lines are sinking or not. They have an exaggerated sense of their own worth ... and whether I were going to be an employee or an investor, I'd want to know if the company is one where the top execs think about and treat their front line personnel in such a way.

(Someone told me the other day about how a certain former CEO of a major supermarket company - his initials were Larry Johnston - used to park his brightly colored Hummer in a no-parking zone close to company headquarters as if to just let people know that he could. Consider this exhibit A ... and the "A" stands for a word I can't use on MNB...)

Those are not the leaders I'd want to follow. That's not the kind of company for which I would want to work. And that is not the kind of corporation in which I would want to put my money.

Which seems like a good sentiment - and appropriate high dudgeon - to go out on as I depart for vacation...

 See you on the 16th.
KC's View: