Corporate Algorithm Addendum

Revolt A Little Some More

In a recent essay,[1] I pointed out that reducing the U.S. wealth gap by taxing corporate profits is ineffective because it comes too late.The rich have already claimed and absorbed their newly acquired wealth and would deeply resent any measure to take some portion of it away just because someone else says they have too much. The taxes levied would be, per individual, huge due to the sums each was allowed to accumulate in the first place. That would give rise to the notion in the minds of people like Louise Linton, wife of U.S. Secretary of the Treasury Steve Mnuchin, that the government now owes them. They would expect favors (private trips in U.S. aircraft for Ms. Linton), disproportionate business opportunities ($3 billion in tax breaks and incentives for Amazon’s HQ2), their voices to be heard (how to whittle down Bears Ears National Monument to allow access for uranium mining conglomerate Energy Fuels Inc.). Worst of all, taxing the rich perpetuates the debilitating myth that the poor are charity cases the superrich must pull through.

The essay excited objections I would like to address here.

Objection: Equal payout to all employees would be unfair.

This is a misunderstanding. The purpose of a corporate algorithm is not to dole out a company’s profits to each employee equally. It is to help reduce the U.S. wealth gap by distributing a corporation’s operating income more equitably among all employees based on the value each creates. The shelf-stockers at Wal-Mart would not suddenly receive the same pay as top management.

Objection: Low earners don’t provide the same value as CEOs.

If wages are any indication, low earners provide just about no value. But neither do CEOs contribute anywhere near what their compensation would lead us to believe. But we do believe because we are susceptible to a superstitious effect-cause logic that allows astronomical salaries to substantiate our perception of the CEO’s worth, while dirt wages persuade us that shelf-stockers are recalcitrant do-nothings. If we look further to who sets the relative compensations – top management – we must think again.

But let us take it at face value: Amazon’s one hundred thousand U.S. fulfillment center pickers just aren’t worth much. All they do is show up at the warehouse, grab a scanner, and log in. The scanner does the rest. For the duration of their shift, the scanner displays what item they are to collect next, tells them how much time they have to do it in, and starts a timer.[2] They’re off! trundling around the multi-storied coliseum-size warehouse as fast as they can go with their trolley as they collect items for order after order. No worries about keeping score, the scanner does that for them, alerting them when they have used up more than the allotted time for picking a particular item and sending that info straight on to the manager with no fuss required from the worker. Under these circumstances, a runny nose without tissues can set off a panic attack. The inkling that a bathroom break might be in order is a horror indeed.

So with scanner in hand and trolley alongside, warehouse pickers pant out their shift, their productivity rated and recorded all day long in increments of seconds per item.[3] When a picker can’t stand the tension or the heat, should any break down – or die,[4] others fill in as rising tide waters flow into footprints left along a beach: silently, immediately.

Yes, pickers aren’t worth much because they do next to nothing. Yet each set of sweaty hands, firm thumbs, and aching feet was responsible for generating about $360,000 revenue in 2018.[5] Take away the hands, feet, and thumbs and Amazon would generate an income of $0.

And just think, some white-collar Amazonian was tasked to think up the unbelievably innovative program called Prime Delivery – aka sizzle those sinews – where customers get their orders picked, packed, and delivered the next day, or the same day, or perhaps in two hours. The customer can decide how urgent it is. This highly touted Prime Delivery would also be worth nothing without the pickers, packers, and delivery teams to dispatch those orders on the double. That is to say, a huge selling point for Amazon is the speed, nimbleness, hardiness, and good will of those recalcitrant do-nothings – its pickers, packers, and delivery teams.

So, Your Honor, I ask you, can’t we pay them just a little more, and turn off the timers?

Objection: Workers earn according to their skills and experience.

This argument stings. There are warehouse pickers and coal miners, short-order cooks and shelf-stockers – jobs that do not profile the abilities of a population but the needs of big business. The wages for such jobs certainly do not reflect the breadth of skills these workers possess. Rather, highly skilled, versatile human beings are told what shape hole to fill for which the company is willing to pay. And they can. They do.

Whatever other skills or experience the coal miner has is of no interest to the coal magnate, who somehow got his hands on the entire countryside and turned it into one sprawling coal mine, forcing tillers of now-ravaged land to enlist in the mines. It is testimony to the strength and adaptability of people of “no skill” and “little experience” that they would take up the only occupation now available to them, a dirty, joyless, dangerous, disease-inducing occupation – and become proud of their heritage to boot, at least in West Virginia and Kentucky.

So, let us not look at a shelf-stocker and assume that’s all she can do. It is all she could get. The fact that she performs such tedious work attests to her high adaptability and desire to support herself.

Objection: CEOs need motivation to rescue struggling companies.

If that motivation is just money, and lots of it, the struggling company may be in for trouble.

Anyone who requires a huge compensation package to rescue a company that is just scraping by – that is to say, cannot afford that kind of payout – cannot be your best candidate. Warren Buffett: “There may be other reasons why an executive is motivated to perform well, but granting stock options is not necessarily one of them.”[6] Buffett, whose motivation no one questions, was the fourth lowest paid CEO in 2018.[7] Rep. Brad Sherman (D, California) and member of the House Financial Services Committee at the time of the 2008 bank bailout, remarked that oversized pay is more likely to impede the development of good bank policies.[8]

Objection: Low earners don’t take the same risks as CEOs.

Philippe Petit walked a tightrope between the World Trade Towers on August 7, 1974. Spanning a net two feet under his wire would have turned a breathtaking 45-minute performance into a sideshow.

But that’s where the net is for today’s top executives. Banks failed in 2007-08; $1.6 billion of taxpayer bailouts went – despite taxpayer protests – to top management[9]. Due to ongoing grievous errors, Facebook stock dipped; CEO Mark Zuckerberg’s wealth dropped to $55 billion. Chief executive compensation in 2018 outpaced shareholder return, rising 6.4% to an average compensation of $1 million a month for 132 chief executives of S&P 500 companies; one third of those companies posted shareholder returns of negative 10% or worse.[10] In March 2019, chief executive of General Motors Mary Barra laid off over 5,000 employees in Ohio and Michigan; her compensation, close to $22 million.[11]

So while CEOs may make decisions that risk thousands of livelihoods, it won’t upend theirs. They know that. It’s hard-coded into their contracts. They insisted on that.

Fun, not risk, characterizes a CEO’s work. The agenda is exciting. They conduct talks and seminars in sumptuous surroundings. They fly from destination to destination in corporate jets, talk about what they love, and love what they’re doing. The pay is good. The expense account is, apparently, unlimited. When compensation reviews do come around, they are performed by compensation boards made up of other CEOs expecting equally favorable reviews when it’s their turn.

So, to answer the objection that low earners don’t take the same risk as CEOs, I would agree. Considering low earners sacrifice their productive hours for a wage that might not cover their living costs, and considering that if and when they walk away, they walk away with nothing – their stakes are considerably higher.

Objection: Who is to determine what the algorithm should be?

Bring in the Devil, if you must, but please not the government. Never a profit-maker, government is a notorious squanderer of resources. But can we leave business to regulate itself?

Business becomes butchery when regulations are not imposed. We see it time after time. It was the U.S. Fair Labor Standards Act of 1938 that restricted child labor, a regulation businesses said would ruin them. It did not, and no one questioned the wisdom of that move since. Today payday lenders offer 1000% per annum credit, something the current U.S. administration praises as providing a valuable service, ignoring the bankruptcies and suicides that result from the practice. Amazon.com Inc. applies punishing physical and psychological controls on hundreds of thousands of fulfillment center workers to keep record-breaking revenues growing.

Regulation is in order. Perhaps not by the government.

Consider the introduction of a corporate algorithm to impose more equal distribution of corporate operating incomes. That would break the spell of the bottom line and fracture greed, with focus shifting to everyone pulling together.

The algorithm would be drawn up by a contentiously healthy mix of business, think tanks, independent economists, and, yes, government. The discussion alone would at least throw the fish on the table. Lying there stinking, it could not be ignored. Alas, that stinking fish and the discussions about what to do with it would cost consumers and taxpayers millions. But if it forces us to address the wealth gap, the stink is worth it.

The Urgency of Reducing the Wealth Gap

The goal of introducing a corporate algorithm to minimize the wealth gap takes on urgency when we consider that the infamous Citizens United judgment of 2010 has translated extreme wealth into political control. Not only does this result in legislation that favors the wealthy, it warps the entire political dialog to excuse and justify that legislation.

The education of our Lower Depths is far inferior to that of the members of its political class. The lower strata have shown themselves to be helpless against political rhetoric calibrated to fool them. Witness fan reaction at Trump’s Michigan rally (March 29, 2019) to his false claim that he supported the Great Lakes Restoration Initiative and always had. The crowd cheered, clueless that the Donald had been trying to nix the project for three years.[12] As they cheered, the Donald had the opportunity to reflect yet again with that little smirk, that sly twinkle in his eye: I can say anything, they’ll believe it. He is right. What force will ever be applied to pull the Lower Depths out from under their ignorance-begetting indigence if not a corporate algorithm? Surely not our benevolent payday lenders?

[1] A Corporate Algorithm, March 10, 2019

[2] John Burgett, ‘“Time to Pick’ Countdown Timer,” AmazonEmancipatory, 2016

[3] Colin Leche, “How Amazon automatically tracks and fires warehouse workers for ‘productivity,’” The Verge, April 25, 2019.

[4] Dave Jamieson, “The Life and Death of an Amazon Warehouse Temp,” The Huffington Post.

[5] According to quotes.wsj.com Amazon.com Inc. (AMZN) generated $359,671 in revenue per employee in 2018.

[6] Stepan Lavrouk, “Warren Buffett on Executive Compensation,”  gorufocus, March 6, 2019

[7] Theo Francis and Lakshmi Ketineni, “The WSJ CEO Pay Ranking,” The Wall Street Journal, May 16, 2019.

[8] “$1.6B of Bank Bailout Went to Execs,” Associated Press, December 21, 2008.

[9] Ibid.

[10] Theo Francis and Vanessa Fuhrmans, “Big Companies Pay CEOs for Good Performance – and Bad,” The Wall Street Journal, May 17, 2019.

[11] Bill Saporito, “C.E.O. Pay, America’s Economic ‘Miracle,’” The New York Times, May 17, 2019

[12] Jessica McDonald, “Trump’s Great Lake Whoppers,” FactCheck.org, March 29, 2109

2 thoughts on “Corporate Algorithm Addendum

  1. I read your essay and it’s obvious you researched the Corporate Algorithm Addendum. I humbly admit I am not well informed, yet appreciate your points.

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