(#107-1) January 16 2015. As matters stand, the American Business Model is broken. Can it be fixed? Maybe…

ANY BUSINESS MODEL BUILT ON TREATING YOUR EMPLOYESS BADLY IS FUNDAMENTALLY UNSOUND, CORRUPT, AND BAD BUSINESS

THE GOOD NEWS? AT LAST, A FEW LARGE CORPORATIONS ARE BEGINNING TO SEE THE LIGHT. BUT THERE IS A LONG, LONG, WAY TO GO

Since I started researching the U.S. economy seriously back in 2004, I have been appalled at the prevailing ethos that a corporation’s workforce is of no significance because only the shareholders count. And I should add that shareholders only count—as far as many CEOs and senior managements are concerned—because looking after them pushes up the share price—and such executives receive the bulk of their remuneration through share options.

I shudder to think how much damage has been done to the corporations themselves, and to the U.S. economy as a whole, as a consequence of such a morally bankrupt, damn-fool thesis. Managements should consider themselves fortunate that more workers haven’t fought back—but, in truth, they have been so abused over the last few decades, they seem to be pretty well crushed.

Evidently, some management teams are beginning to realize that their greed has consequences—and that sooner or later someone is going to reinvent the guillotine.

Better late than never.

I was glad to see that phrase ‘social compact’ re-appearing. Of course there has to be a social compact (also called a ‘social contract’) in business—or else you get exactly what we have had—a lousy economy full of scared people (and a relatively small number of very rich, very greedy ones).

The American Nightmare. We can, should be, and will be—I can but hope—better than this. Nonetheless, it is sobering to observe that the very latest government statistics—in the middle of some very encouraging figures about the economy—actually reported earnings going down.

The following is from The Progress Report.

Health Insurance Giant Aetna Is Raising Wages For Its Lowest Paid Workers

A common refrain from some in the business community who oppose a minimum wage increase is that higher wages for low-income workers will be costly enough to either force businesses to raise prices for consumers or cause them to lay off workers. Aetna, a Fortune 100 company with nearly 50,000 employees, just made a decision that sharply rebukes that argument. The health insurance giant has announced it is raising the minimum wage for its workers to $16 per hour. In doing so, the company specifically cited the business benefits, not the costs, of the move.

The raises, which comes on the heels of similar wage increases by big name companies likeStarbucks and Gap, are significant. An estimated 5,700 Aetna employees will get a pay bump — an 11 percent increase on average and up to 33 percent for some workers. And it won’t be free: the company expects the move to cost an estimated $14 million this year, and $25.5 million in 2016.

Nonetheless, Aetna CEO Mark T. Bertolini laid out the business case for raising the wages of low-income employees. Here are a few of the reasons he cited, in an interview to the Wall Street Journal:

• Adapting the company for the future: “We’re preparing our company for a future where we’re going to have a much more consumer-oriented business.”
• Workforce development: “[Aetna wants] a better and more informed work force.”
• Reducing turnover costs: According to the Wall Street Journal, “Mr. Bertolini said Aetna hopes to reduce its turnover costs of around $120 million a year and improve the quality of job prospects and the engagement of workers who interact with consumers and health-care providers.”

And then there is a broader reason that factored into Mr. Bertolini’s decision: “It’s not just about paying people, it’s about the whole social compact,” Mr. Bertolini said, adding, “Why can’t private industry step forward and make the innovative decisions on how to do this?”

BOTTOM LINE: The decision by Aetna to raise wages for their low-income employees demonstrates one of the business imperatives for raising wages. Simply put, investing in workers pays off for companies in more ways than one. We’d thank Aetna for it’s decision, but we know that the company didn’t made this move because of groups like ours. It made the move because it cares about its workers, and it cares about its bottom line.

VOR words c. 250

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