Companies That Owe Employees a Raise

KFC Restaurant
Source: courtesy of KFC
While CEOs of companies with the strongest financial results are usually paid hundreds of millions of dollars, rank and file employees at these corporations are often less fortunate. Only a small number of the best performing companies give raises or bonuses to most employees that are tied to earnings. Why shouldn’t these companies spread the wealth?

Click here to see the companies that owe employees a raise

Several of the American most successful companies have large numbers of low-paid employees. These people work in retail stores, call centers, or clean hotel rooms. Some do not make a great deal more than the minimum wage. However, their work is critical to the daily success of their companies. Despite their modest pay, they are often the face of their corporations. The senior management at companies like McDonald’s and AT&T do not deal with customers — the clerks and restaurant staffs do.

Not all the divisions of these companies pay their employees poorly. Many of the people who work at Walt Disney’s theme parks have modest salaries. However, employees at the company’s ESPN and movie studio divisions generally do better. Comcast’s account executives who sell cable subscriptions do not make a great deal of money. Nevertheless, people who work at some parts of the company’s NBC division are paid handsomely.

Does a public company have an obligation to reward all of its employees if its earnings are particularly strong? No. But there is a strong case to be made that these workers deserve higher compensation when earnings improvements are so extraordinary that they give shareholders and management great returns.

Based on data provided by Capital IQ of S&P 500 companies, 24/7 Wall St. determined which corporations had high net income, high net profit margins, and major one-year growth in net income. In order to be considered, companies had to be in a customer-facing indusry, and have a large number of low-wage workers. We excluded banks because the data we used to measure profitability is inadequate for judging the industry’s performance. Employment data by company are from Yahoo! Finance. CEO pay is from filings submitted by public companies with the Securities and Exchange Commission. Figures on compensation are from and are self-reported by users to the website.

These are the companies that owe employees a raise.

1. Comcast:    
> 1-yr. stock price change: 44.45%
> 5-yr. stock price change: 93.63%
> Employees: 129,000
> CEO pay: $29,124,014

Comcast is the largest cable company in the U.S. In fiscal 2012, Comcast’s net income was $6.2 billion, a nearly 50% increase from the previous year. In the past 12 months, the company’s stock rose by roughly 44%. In what many consider to be a smart move, the company diversified its operations by buying control of NBCUniversal two years ago. Earlier this year, it paid GE $16.7 billion for the remaining 49% ownership position. NBCUniversal operates the cable and broadcast television business, and the studio businesses dominated by Universal Pictures. Comcast customer care and direct sales jobs often pay modestly. The average salary for a Customer Account Executive at Comcast was just $13.39 an hour, according to Glassdoor.

2. Walt Disney
> 1-yr. stock price change: 50.94%
> 5-yr. stock price change: 93.49%
> Employees: 166,000
> CEO pay: $40,227,848

Walt Disney founded the company in 1923 as The Disney Brothers Studio. The company has since expanded to include Walt Disney studios, Disney consumer products, a network television business, which includes ABC and a majority interest in ESPN and and the company’s interactive division. Disney is widely regarded for its employee customer training. The company even has an operation called the Disney Institute, which trains management and workers from other companies. According to the company, BusinessWeek’s Best Internships survey ranked Disney #11 on internship opportunities for undergraduates. Disney reported revenue of $42.3 billion in the most recent fiscal year, up 3% from the prior year, and net income was $5.7 billion, up 18%. The improvements were mostly driven by success from its parks and resorts division, which started with the founding of Disneyland in 1955 and employs a number of low-paid workers, including the the theme parks cast members.

Also Read: America’s Most Profitable Products

3. McDonald’s
> 1-yr. stock price change: 6.91%
> 5-yr. stock price change: 68.15%
> Employees: 440,000
> CEO pay: $13,751,919

The fast-food industry, lead by McDonald’s, fared better than nearly any other industry during the economic downturn. Yet the situation for most of the fast-food giant’s employees hasn’t improved. The company is still paying its front-line workers minimum wage or very close to it. According to Glassdoor, the average pay of a cashier was a mere $7.69 an hour. Yet with payroll one of the company’s major expenses, investors are concerned about a possible minimum wage increase. The day after President Barack Obama announced a plan to raise the minimum wage to $9 an hour, McDonald’s share price tumbled. On the other hand, the low wages could be hurting company’s morale. Recently, company executives notified franchisees that more than anything, customers complained about “rude and unprofessional employees.” Still, McDonald’s hasn’t announced any plans to pass some of its billions of dollars in profits to employees. Instead, in late 2012, the company said it would return $5.5 billion to shareholders by the end of the year through both an increased dividend and share repurchases. The company has raised its dividend every year since 1976.

4. AT&T
> 1-yr. stock price change: 13.45%
> 5-yr. stock price change: -7.10%
> Employees: 241,800
> CEO pay: $22,234,703

AT&T had a net profit of $7.3 billion in 2012 on revenue of $127.4 billion. This is an improvement from the $3.9 billion profit on revenue of $126.7 billion in 2011. The company’s CEO, Randall Stephenson, received more than $20 million per year between 2010 and 2012. In late November, the company stated that it would continue to phase-out its landline telephone service by spending $14 billion over the next three years to extend its broadband-based service to 75% of its landline customers. This will likely result in more job cuts in the landline business, which has already suffered from reduction in headcount in recent years. But these reductions have, in the opinions of many, hurt customer service. According to Glassdoor, the customer service representatives and retail associates are getting the worst pay, with some making as a low as $10 an hour.

5. Yum! Brands
> 1-yr. stock price change: -3.95%
> 5-yr. stock price change: 68.74%
> Employees: 523,000
> CEO pay: $14,168,355

Yum! Brands — which includes fast food chains KFC, Pizza Hut and Taco Bell — is another company that is well known for paying a large portion of its workers either minimum wage or just slightly over that. For example, a crew member at Taco Bell makes an average of jthust $7.76 an hour, according to Glassdoor. Meanwhile, the company’s chairman and CEO, David Novak, received more than $14 million in 2010 and 2012, as well as more than $20 million in 2011. Though restaurant workers at Yum! Brands chains are not unionized, they have gone on strike in recent months, seeking higher pay. Meanwhile, Yum!’s stock price has soared almost 70% in the past five years as both revenue and earnings have increased solidly in recent years.

Also Read: America’s Nine Most Damaged Brands

6. DirecTV
> 1-yr. stock price change: 15.29%
> 5-yr. stock price change: 123.89%
> Employees: 27,200
> CEO pay: $18,043,266

DirecTV has performed very well in recent years, providing handsome rewards to shareholders. In the past five years, the company’s stock price has risen nearly 124%, compared to a roughly 15% increase in the S&P 500 during that time. Like the other companies on this list, DirectTV’s CEO is paid very well, taking home more than $18 million in 2012. But like other cable providers, its call-center workers and technicians are generally paid relatively low wages. According to the American Customer Service Index, DirecTV provided slightly better customer service than many of its competitors. However, DirecTV’s reputation took a hit last year when it lost the rights to broadcast certain cable channels because of a dispute with Viacom over licensing fees. The blackout ended within weeks when an agreement between the two companies was reached.

7. Public Storage
> 1-yr. stock price change: 18.57%    
> 5-yr. stock price change: 80.87%
> Employees: 5,000
> CEO pay: $15,339,125

Public Storage operates more than 142 million square feet of rentable self-storage space across the world. The business has been exceptionally profitable in recent years, with a net profit margin of 50%, third-highest of any company on the S&P 500. The company reported a net profit of more than $939 million on revenue of more than $1.8 billion in 2012. Public storage has also provided stellar returns to investors over the last five years, at nearly 81% versus 16% for the S&P 500. But the company’s 5,000 employees have not been as lucky as its investors and managers — including CEO Ronald Havner, Jr., who took home over $15 million last year. A large number of the company’s currently open positions in retail sales pay roughly $9 to $10 dollars an hour .

8. Time Warner Cable
> 1-yr. stock price change: 22.03%
> 5-yr. stock price change: 8.83%
> Employees: 50,250
> CEO pay: $17,352,728

In the last year, Time Warner Cable’s stock price has risen by roughly 22%, better than the 18% rise in the S&P 500 during that time. The CEO has been compensated quite well during the same time, receiving more than $17 million in 2010 and 2012, and more than $16 million in 2011. But customer service positions and field technicians tend to receive average wages of between $12 to $15 an hour. The company does have its shortcomings. Unlike DirecTV and AT&T, Time Warner Cable actually scored worse on the American Customer Satisfaction Index.

Also Read: Nine Retailers with the Worst Customer Service

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