U.S. Senators Bernie Sanders (I-VT) and Ro Khanna (D-CA) on Thursday introduced a bill that would prohibit Walmart Inc. (NYSE: WMT) or any other company that employs more than 500 people from repurchasing shares until the companies pay a minimum wage of at least $15 an hour.
The legislation dubbed the Stop WALMART Act, also includes requirements that employees be able to earn up to seven days of paid sick leave to care for themselves or a family member and that compensation for a company’s highest paid employee be limited to 150 times the median pay of all employees. The act’s full name is The Stop Welfare for Any Large Monopoly Amassing Revenue from Taxpayers Act.
Following passage of the tax cut bill last December, Walmart raised its minimum wage to $11 an hour, improved other benefits and paid cash bonuses of up to $1,000 to non-executive employees. In 2016 the company raised its minimum wage to $10 an hour.
This past September, Sanders launched a similar campaign against Amazon.com Inc. (NASDAQ: AMZN), the so-called BEZOS Act, that led to the company agreeing to raise its minimum wage to $15 an hour for all employees. At the same time, Amazon revised its bonus and stock award programs in ways that were not welcomed by all the company’s employees.
Along with yesterday’s announcement, Sanders and Khanna posted a letter from more than 40 economists and activists praising the new proposal:
As business firms buy their own shares off the market, they both reveal a longstanding problem and additionally cause new problems. The problem they reveal is that firms are not investing in new wealth- and employment-generating growth, but instead simply bidding up prices of shares that already exist. The new problems that stock-buybacks cause are, among others, that they (a) reward managers not for good management, but for artificial share price manipulation, and (b) further concentrate wealth-ownership in a country whose wealth is already concentrated to a degree without precedent in our history.
The bill has essentially no chance of being considered in the Republican-controlled Senate, but it does spotlight the issue of rising inequality in America. For example, according to the AFL-CIO’s Executive Paywatch 2018 report, the average CEO of an S&P 500 company earned 361 times the pay of an average worker. Walmart CEO Doug McMillion earned nearly $23 million in 2017, or 1,188-times the median for all workers.
The real wealth at Walmart passes into the hands of the Walton family, which owns nearly 50% of the retailer’s common stock. According to Sanders and Khanna, since 1982 the family’s wealth has increased by 10,000% and the Waltons now own more wealth than the bottom 40% of all Americans, while more than half of Walmart employees are food insecure.
The Sanders-Khanna approach to solving wealth inequality calls for the federal government to intervene and force U.S. corporations to consider more than shareholder returns as the measure of a company’s success. That principle has been enshrined in U.S. law and practice for decades and the chances of reversing it are slim — but not zero.
Walmart stock traded down about 1.2% Friday morning, at $98.36 in a 52-week range of $81.78 to $109.98. The stock’s 12-month consensus price target is $106.19.