WASHINGTON, D.C – U.S. Senators Cory Booker (D-NJ) and Bob Casey (D-PA) today introduced a bill targeting the increasing trend of corporations using profits for stock buybacks, instead of using them to raise wages for workers. Under the Worker Dividend Act, if a company buys back stocks to enrich its shareholders and CEO, it must also pay out a commensurate sum to all of its employees – the “workers dividend.”
“Today, a culture of ‘short-termism’ pervades industry and financial markets, as companies prioritize short-run returns to investors and executives over investments in workers, like higher wages and expanded training, which pay off over the long run,” Senator Booker said. “This perverse prioritization means that even though corporate profits are at their highest mark in 85 years, workers’ wages are near their lowest point in over six decades.”
“Indicative of this trend is the massive wave of stock buybacks, in which companies are using their profits to benefit wealthy investors, as opposed to reinvesting those profits in their workers, in the form of raises,” Senator Booker added. “Our bill would mitigate this disturbing trend by ensuring that if a company has the profits to reward its shareholders, it must also reward the very people that help the company prosper – its workers.”
“As I have highlighted over and over, the GOP tax bill that is now law is a giveaway to the super rich and corporations and doesn’t do nearly enough for the workers who are the reason these companies are profitable to being with,” Senator Casey said. “I introduced an amendment during the rushed consideration of the tax bill, which is similar to this legislation, making sure corporations increase worker wages at the same rate they increase payouts to their executives and stockholders. Not one Republican supported it. I am happy to join Senator Booker in our continuing efforts to persuade some of our Republican colleagues to join this bill and support American workers.”
In a recent survey of CFOs at 400 of America’s largest public companies, 80 percent said they would sacrifice the firm’s longer-term economic value in order to meet quarterly earnings expectations.
Between 2003 and 2012 companies on the S&P 500 dedicated 91 percent of their total earnings to stock buybacks and corporate dividends, leaving just nine percent for things like raises for workers and other workforce investments. Over $200 billion in stock buybacks have been announced so far in 2018 – a record for this point in the year that is more than 40 times the $5 billion that has been announced in worker bonuses and raises.
Specifics of the Worker Dividend Act:
The “workers dividend” would apply to all publicly-traded companies with at least $250 million in U.S. earnings in a given year. The total value of a company’s obligation would be calculated as the lesser between the total amount of that year’s stock buybacks and 50 percent of the company’s profits above $250 million. That total obligation would then be distributed equally to each of the company’s employees.
Company A earns $2.25 billion in U.S. profits and repurchases $500 million in shares. Its worker dividend obligation would equal $500 million (the lesser of 50 percent of profits above $250 million—or $1 billion--and the amount of buybacks). If Company A has 100,000 employees, then each worker would receive a payment of $5,000.
Company B earns $5.25 billion in U.S. profits and does not repurchase any shares. Its worker dividend obligation would be $0 (the lesser of $5 billion and $0).
Today’s bill comes on the heels of a bill Booker introduced last week also aimed at boosting worker wages. The End Employer Collusion Act would crack down on collusive “no poaching” clauses that are often used by large franchisors to prohibit franchisees from hiring each other’s workers.
Dating back to his days as tenant lawyer, City Council member, and Mayor of Newark, Booker has been a leading voice for economic justice and the fundamental promise that if you work hard in America, America should work for you. As part of this commitment, Booker has been a vocal advocate for cracking down on corporate practices that depress wages and limit opportunity. Last year, he introduced a bill targeting companies that outsource much of their labor costs to contractors and temp workers rather than hiring direct employees. He also recently pressed antitrust regulators on corporate concentration and the increasing trend of “monopsony” power, which limits worker mobility and depresses wages.