UPDATE: Who benefits from corporate tax rate cuts?

About a month ago I had a piece on the blog about the recent cuts in the corporate tax rate for US companies - more specifically, I looked at what companies were actually doing, (or have stated they will do) with the proceeds of these cuts, and how organizations may or may not be able to leverage these plans in their recruiting and retention efforts.

Long story short, last month I said, (and shared some data) that said most companies are taking care of shareholders before and to a much more substantial degree than they are looking after current employees (with raises, bonuses, increased development opportunities), and potential future employees, (investing in new facilities, R&D expansion).

Well, some more and more current data about corporate spending plans for their tax cut driven windfall is in, and sadly for (most) workers, the story has not changed all that much. Courtesy of Just Capital, a non-profit organization that has been monitoring what large US companies are doing and planning to do with these proceeds, have a look at how about 120 large organizations are allocating these new found funds:

If you can't see the chart, (email and RSS subscribers may need to click through), the data breaks down by category of corporate stakehiolder or potential spending group as follows:

Shareholders - 57% (stock buybacks, dividends)

Jobs - 20% (commitment to job creation, capital investment intended to add jobs)

Products - 7% (invesment in product quality or benefits)

Customers - 6% (reduced pricing, increased service, privacy, safety)

Workers - 6% (wages, bonuses, benefits, training)

Communities - 4% (charitable giving, matching gifts, volunteering)

Although the many announcements and rounds of one-time bonuses that many corporations have granted to employees have generated a lot of news, the Just Capital data continues to show that these programs and plans amount to an exceedingly small percentage of the total corporate benefit of tax cuts - estimated to be about $150B in 2018 alone.

As I speculated the last time I looked at this data, organizations that were really making a meaningful and greater than average commitment and investment of these tax windfalls in their employees would likely be able to leverage the investments effectively as a tool for retention and increased overall employee loyalty. And potential new recruits could also be attracted and drawn to organizations that if not putting their employees first on the stakeholder pecking order, at least consider them to be more important (relative to shareholders for example) than competitors and industry averages.

And here's one more bit of interesting information to consider for organizations and leaders trying to decide the 'best' allocation of tax savings. Just Capital periodically polls American's attitudes towards corporations - mainly to find out which corporate behaviors are seen as being the most 'just' or fair. In the most recent polling, how corporations treat their workers came in as the most important category in evaluating these corporations, with almost a quarter of respondents ranking worker treatment as number one.

Shareholders? How corporations treat them came in last, with only 6.4% of respondents naming their treatment as most important when assessing corporate behavior.

Lots to chew on here for sure. I will probably let this topic go for a while, as frankly its a little depressing. I suppose for most organizations, it is better to be a shareholder than anything else.

Have a great day!

US companies are flush with cash, where does 'raise wages' fall on the priority list?

Last week on the blog we noted the shift in the mix of annual employee compensation increases - companies have and are continuing to increase their use of one-time and variable comp increases like annual bonuses and lessen their use of base (and in theory, recurring), salary and wage increases. The argument, many companies make, is that variable comp awards tie comp more closely to individual and organizational performance measures and provide the organization more flexibility and adaptability to respond to changing market conditions and business performance.

We have even seen this trend play out in the wake of two recent legislative decisions that have combined to create a pretty significant windfall of excess cash/after tax profit for many of the US's largest companies. One, the reduction in the 'stated' corporate income tax rate from 35% to 21%. And two, the reduction of the tax rate on the repatriation of US company cash that has been parked in overseas accounts, and now can be brought back to the US at a lower tax rate (about 15%).

With all this additional cash available to many large companies (most of whom are large employers), it makes sense from an HR / Talent point of view to ask a pretty simple question: Will and to what extent will all this cash flow to employees in the form of salary/wage increases or bonuses?'

Well, sadly for most employees, and for HR and Talent leaders who might be advocating for increased investment in people, the short answer to the question is 'Hardly'. Take a look at the chart below, from a Fortune piece citing some recent BofA Merrill Lynch research on just what these companies plan to do with their soon to be repatriated earnings:

Looking though that list of top six likely uses of this repatriated cash, maybe you could argue that the one that came in sixth, 'fund pension' has some direct benefit to current employees. Share repurchases, which we will see again in a second when looking at the knock-on effect of lower income tax rates, could also benefit employees who participate in ESOP plans or have a decent bit of their 401(k) tied up in company stock. But that is an indirect, and incomplete benefit at best.

Another review, this time by the financial firm Goldman Sachs, paints a similar picture of who the likely beneficiaries will be from lower corporate tax rates. From a piece reported by Marketwatch:

Buyback announcements are up 22% this year to $67 billion in just six weeks, Goldman Sachs said in a note to clients. This follows a report by benefits consulting firm Aon Hewitt finding that 83% of large companies don’t expect the tax cut to boost salaries at all — just help pay for small bonuses companies like WalMart  and AT&T, gave workers, which reporters soon discovered were, themselves, skewed toward higher-paid, longer-tenured employees in many cases.

And it comes as Goldman finds companies have raised guidance on re-investment in their businesses — the putative reason for cutting corporate taxes at all — only 3%.

A couple of things to note here. CEOs and Boards do have a responsibility to their shareholders - some would certainly argue that the shareholders' concerns matter more to corporations than any other stakeholders. So moves to increase the share price (repurchases), and return profits to the holders, (increased dividends), are definitely proper and prudent uses of excess cash/profits.

But the really small levels of internal re-investment, and commitment to improving the long-term compensation levels for employees is a little bit disconcerting. But it also reminds us of something really important. Namely, that for most large organizations labor cost, (and by extension, their investment in people), is just that - a cost that has to be managed.

What the organization is willing to invest, and whether they are willing to increase this investment is subject to a complex set of variables - competition for talent, product/service strategy, overall labor market conditions, the impact of automation and outsourcing, and even the legal/regulatory climate.

But what does not, yet, seem to be moving the needle on investment in people and employee compensation,(aside from the slew of copycat one-time $1,000 bonuses we heard all about), is this sudden windfall of excess corporate cash/profits as a result of recent corporate tax changes.

More simply put, organizations increase what they are willing to pay for any resource only when they have to, not because they are able to.

Apple won't volunteer to pay more per piece to their supplier of iPhone screens just because they can.

And they won't volunteer to pay their engineers, accountants, and facilities staff more just because they can as well. Interesting times for sure.

Have a great day!

Steve's Holiday Gift Recommendation #5 - For the corporate design geeks like me

We are grinding down to the end of the year pretty quickly, and glancing at the calendar I think this will be the penultimate one of these holiday gift recommendation Friday posts. Then we can get back to the normal important things we do around here like ranking types of food and making even more connections between work and the NBA.

This week's recommedation is slightly different, in that the actual gift won't be available until the Spring, but once I heard about it and checked it out I had to include it as one of the recommendations. Maybe you can order it for that distant relative or friend you won't actually see during the holidays, but wanted to make sure you did not totally forget them. Or maybe you just want to get this one for yourself (or your favorite blogger), and won't mind the delay.

Anyway, on to the gift recommendation...

You may not know Chermayeff & Geismar & Haviv by the name of their firm, but you certainly know them from their work. This is the design firm who have created dozens if not hundreds of iconic corporate logos, trademarks, and identity programs. The NBC 'peacock', the US Bicentennial branding, Chase Bank, and the still popular even though the company is no more, Pan Am Airlines are just a few of the images and brands that Chermayeff & Geismar & Haviv have created since the firm was founded in 1957.

To recognize, celebrate, and commemorate the firm's 60 years at the forefront of corporate identitity and design, they have created a new book titled 'Identity: Chermayeff & Geismar & Haviv' which features over 100 case studies of their work, including some of the brands I mentioned above, as well as others you know and recognize like PBS, Mobil, and the Smithsonian. The book itself will be fantastic to look at and page through, as befitting the firm's focus and commitment to the image, the book is mostly images - examples of the amazing and iconic work this one firm has produced that has had an outsized impact on workplaces and business over the last 60 years.

You can pre-order 'Identity: Chermayeff & Geismar & Haviv' here and it is expected to ship in May. You can be patient. I am sure the design lover in your gift list will be happy too.

Why is this stuff important for anyone in business?

I think this quote from Ivan Chermayeff sums it up - “Symbols don’t make clear what you do; it makes it clear who you are."

Reminder, I have no affiliate relationships with any of the gift recommendations. I just think they are cool.

Have a great weekend!

CHART OF THE DAY: The World's Most Valuable Brands

Happy last-day-of the-month Monday!

Quick shot for kicking off a busy summer week. Courtesy of our pals at Visual Capitalist, let's take a look at the list of the corporations owning the world's most valuable brands:

The 'brand value' methodology is referenced on the infographic above, but the essential element is that it it is the intangible asset that exists in the minds of consumers, which is usually an image forged over time through exposure to branding, ads, publicity, and other types of personal experiences. Attaching a dollar value to this intangible asset is perhaps more art than science, but while the specific dollar values can be debated, it probably can't be debated that there is at least some value to the brand.

So while the top companies for brand value are likely the ones that you'd expect, after I saw this chart I couldn't help noticing that these companies also seem to be the ones that show up on the various 'Best or Top of Most Awesome Companies to Work For' lists that float around on the internet.

Take a look at just one example, from our friends at LinkedIn, on the '40 Most Attractive Companies in the World' (according to LinkedIn)

I cut the Top 40 List off at 7 due to space concerns and also because that is all I needed to make my point

Hey, what a surprise! The Top 5 Global Brands in terms of value, (Google, Apple, Microsoft, Amazon, Facebook), all show up inside the Top 7 of the LinkedIn 'attractiveness' list.

And you'd find similar kinds of results on most of the other types of 'Best Places' lists - they are dominated by these mega-tech brands that make the coolest products, have the most incredible corporate campuses, and often are led by influential and charismatic leaders.

All of this to make the point you already know - the thing we like to call 'employer brand' is inextricably tied up in what most people will call the consumer or public brand. The most powerful, valuable, and well-known consumer brands have such an advantage in the employer brand category that it is almost laughable.

If you are one of the companies on the 'most valuable' list, congrats, things are always going to be easier for you to attract and recruit. If you are not one of those global, mega-brands, you have to know you are starting any competition for talent at a disadvantage. 

Some brands have all the luck, I guess.

Have a great week!

More reasons to wear the same thing to work every day

Lots of folks spend 10 or 15 or maybe even 30 minutes each morning staring at the closet trying to figure out what outfit to wear to work that day.

Recently hired University of Michigan Football Coach Jim Harbaugh is not one of those people. He is rarely seen not wearing his 'signature' Walmart Khakis and black long sleeve shirt.

Why? 

As Harbaugh puts it, "It's gotten to the point where I save so much time a day knowing that I don't have to stand in front of the closet, trying to decide what outfit to pick out. About 15 - 20 minutes a day. That adds up, day after day."

Harbaugh isn't the only successful, famous person who adopted this 'wear the same thing every day' philosophy. So did Steve Jobs. So does President Obama (for the most part).

Wearing the same thing every day does save time, and it may even be kind of liberating. But most of us don't even consider it. I wonder why.

A few months ago I posted about this idea over on Fistful of Talent, and since the Harbaugh story put the issue on my mind again, I am going to run that FOT post below, because I still think it is interesting, and I am kind of too busy today to come up with anything better. <FOT Post below>

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The Corporate Uniform… Or, Are you Brave Enough to Wear the Same Thing Everyday?

Steve Jobs.

Mark Zuckerberg.

President Obama.

Karl Stefanovic. (Okay, I bet you have no idea who this guy is… hang in there, we will come back to him).

What are these four gentlemen all famous for? Check that—a better question is this: What do these four gentlemen all have in common?

Besides being extremely successful in their chosen fields of endeavor (even Karl—I will explain), they all at one time or another adopted a personal uniform, i.e., they essentially elected to wear (more or less) the same basic clothes every single day.

Jobs, of course, became renowned for his black turtlenecks and blue jeans. Zuck, for his seemingly endless supply of gray t-shirts and hoodies. President Obama wears only gray or dark blue suits.

And our man Karl, who, in case you are not familiar is an Australian morning TV host, has worn the same blue suit on the air every day for a YEAR.

The reason that the first three men in this list elected to adopt their signature style are remarkably similar. Each man felt like they had much more important things to worry about than fashion or even simply choosing what to wear each day. So by adopting a “uniform” of sorts, they effectively eliminated one set of decisions from their daily routine.

And there is at least some science that suggests that reducing the sheer number of decisions that one has to make can help to avoid something known as ‘decision fatigue’, a situation where the quality of decisions deteriorates after a long or prolonged period of decision making. When decision fatigue sets in, it can be hard to make appropriate trade-offs and can lead to decision avoidance and irrational—even careless—choices.

But let’s get back to Karl Stefanovic, the person on this list you are likely least familiar with. Karl, in an experiment of sorts and influenced by his observations that there exists a double standard in TV and entertainment between how men and women’s appearance are judged, decided to wear, on air, the same blue suit every day for a year.

Karl’s theory was that he could easily get away with wearing the same “uniform” everyday on TV, but his partner, a woman, would be excoriated by the public (and probably by management) for attempting the same stunt. And while we don’t know for sure what would actually have happened if his co-host Lisa Wilkinson tried the same move, we do know the result of Karl’s “wear the same suit on TV every day for a year” experiment.

The result?

No one noticed.

Not a single viewer complained. No letters or emails or tweets about the suit. Management did not issue a correction or reprimand.

No one cared.

Karl was, in his words, not being judged on what he wore or how he looked, but rather on “my interviews, my appalling sense of humour—on how I do my job, basically.”

But if co-host Lisa (or any high-profile female personality or executive) tried the same stunt, can we honestly say that the reaction would be the same?

If Ginny Rometty or Sheryl Sandberg or Marissa Mayer wore the same clothes every day (like Jobs and Zuck and Obama), would we EVER stop talking about what they are wearing and focus on their performance?

Probably not. Men get judged (primarily) by what they do. Women, especially in visible, important positions, never seem to be able to shake the criticism and commentary about things like clothes and hairstyles.

The truth is that it hardly matters at all what people wear or what they look like. What matters is what they do.

For Jobs and Zuck, we don’t give that conclusion a second thought.

Why can’t we say the same thing for the rest of us?