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View Diary: No thanks to Walmart (145 comments)

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  •  Sigh. Costco is a completely different (2+ / 0-)
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    AlexDrew, Treetrunk

    business model.  It's a membership place, more like Sam's Club.  It's like comparing McD's to a private dinner club, and saying since the private club pays its wokers more, so can McD's.  

    Shareholders do not sue if "wages are too high."  They could sue if officers knowingly pay more for something - equipment, rent, or employees -- than makes business sense in that business model of that company, and if they do that knowing that it will cut into profitability.  What employees are paid is a balance - officers are supposed to pay enough to keep employees with the skills they need.  Employees have an economic value to a corporation, and the officers keep track of that kind of thing.  Also. losing employees -- turnover -- costs money, but that may -- or may not -- be enough cost to justify raising salaries.  You have to do the numbers based on the business model of that corporation, its revenue and its expenses, to see what is the best thing for the corporation's overall profitability.

    If an officer said, "profitability be damned, I'm going to pay every Wal-Mart worker $25 an hour," and did that and profits went down, yes he would be sued.  If an officer said, "we're going to spend capital to invest in more automation, so we'll need fewer workers, but more of the kind of skilled workers that we'll have to pay $25 an hour, and here's how the numbers work out demonstrating that increase in automation and fewer, bu higher paid workers will increase profitability over the long term," that's the kind of analysis they are SUPPOSED to do.

    •  *sigh* squared (3+ / 0-)
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      jbsoul, 6412093, Treetrunk

      Costco is an example - point being, you can apply the logic just about anywhere.

      Shareholders could sue GM, Ford or Chrysler because they feel they pay their union employees too well.  Ad nauseum.

      "Fiduciary duty" is not a license to be a bunch of dicks.  Period.  You already note above employees have a financial value to businesses.  As such, that value is the defense against some nutjob shareholder decided to bring suit - all an employer must do is state that paying the employees $X brings value to the company because the employee(s) themselves are valuable.  This works from executive compensation on down.

      Now, if you want to drag out reductio ad absurdum and state that a company would be successfully sued if they paid janitors $200k a year, sure, you'd be right.  But would Walmart be sued over lost shareholder value if they raised their starting wage to $15/hour and provided decent benefits?  FUCK NO.  Even at your example of $25/hour I would seriously question whether or not a suit would be successful.

      So I reiterate:  Fiduciary duty is not a license to be a bunch of Gordon Gekko-ish dicks about employee compensation.  Dismiss it all you like, however, I doubt you can actually find legitimate case law anywhere in the US to reflect an employer being successfully sued over it's rank and file employees compensation being too high.  There's a reason for that - "too high" is relative, not an absolute.

      So while the diarist phrased the "no laws.." part in a way that one could bring up fiduciary duty to shareholders, his intent is correct - Walmart could pay it's employees far better and still not get sued.  Perhaps you should consider that instead of berating him over minutiae.

      •  You really should read the law on this. (2+ / 0-)
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        Justanothernyer, Treetrunk
        But would Walmart be sued over lost shareholder value if they raised their starting wage to $15/hour and provided decent benefits?
        If doing this significantly cut into profitability, AND if the officers did it knowing it would hurt profitability but intentionally and knowingly disregarding what is good for the corporation's profitability, sure they'd be sued.  If the officers said, "I don't care if the corporation makes money, I think we should pay workers $x an hour even if it means the corporation does not make money," that would be a pretty clear violation of their fiduciary duty.

        If they did it as a result of a specific business plan geared toward increasing the corporation's profitability, then no they would not be sued.  That's the point.  Their first and primary duty is to do what's good for the corporation.  They can do what's good for the employees to the extent that it's good for the corporation, and sometimes those two things coincide.  Sometimes it is necessary to pay more to get employees with specific skills, sometimes it is worth it to pay more if turnover costs justify it.  Officers can explore all those possibilities.  But the point is that their first and primary duty is to act in the best interests of the corporation.  

        You probably should read the law -- that ABA publication is a good start, before you talk about what would, or would not, get people sued.  Or maybe talk to some of the lawyers who have made a lot of money suing officers and directors in shareholder derivative suits.  See also here.

        •  Pull up Lexis/Nexus (2+ / 0-)
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          6412093, Treetrunk

          and find me a successful suit over rank-and-file employee compensation.

          Good luck with that.

          /dropsmic

          •  Read what I said. (2+ / 0-)
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            AlexDrew, Treetrunk

            I did not ever say that simply raising employee pay would be justification for liability.  There are lots of instances where raising employee pay can be in the best interests of the corporation.  If an officer raises employee pay AND has worked through the numbers to show that there is a benefit to the corporation, of course he will not be sued for that.

            What I said is that if an officer raised employee pay while knowingly and intentionally disregarding what is good for the corporation, THAT would be a breach of the fiduciary duty.  Acting knowingly and intentionally in disregard of the best interests of the corporation is virtually a per se violation of the fiduciary duty.   People get sued for THAT -- for acting in a way that knowingly and intentionally disregards the best interest of the corporation -- all the time, especially when a corporation is no longer profitable as a result.

            Since you apparently did not carefully read what I wrote before, I'll say it again as simply as possible.  

            -- raising employee pay with justification (for example, economic data) as to how that will benefit, or at the very least not harm, the corporation = no breach of fiduciary duty.

            -- raising employee pay while knowingly and intentionally disregarding what is good for the corporation,  and loss of profitability results = breach of fiduciary duty.  

            Certainly no one gets sued for raising employee pay if it's justified by what is in the best interests of the corporation.  I've expressly made that distinction.

            •  I get your point (2+ / 0-)
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              jbsoul, Treetrunk

              and acknowledge its validity:  If the company raised wages and publicly stated it was doing so because of social pressure and civic duty, it would be problematic.

              However, I don't think anyone is saying or suggesting that Walmart (or any other business, for that matter) raise wages using that argument.

              The argument is a Henry Ford-esque "paying employees better is good for the bottom line of the company."  There is plenty of economic theory to back that argument up and insulate them from suit.  Could some nutjob shareholder still file one anyway?  Sure.  Would they be successful?  Very unlikely.  That's the point.

              I most certainly read what you wrote.  What you don't seem to be getting is outlined in my second paragraph of this response.  You're arguing against an argument not made here, and going after the diarist because the diarist didn't clearly communicate what he meant with his comments about "no laws" in a manner that you understood.  The intention of his comment seemed pretty clear to me, however.

        •  HERE'S THE RUB ABOUT YOUR POINT: (1+ / 0-)
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          Treetrunk

          PROVING that providing a better living for employees has a detrimental effect on the health of a company.  Open to judicial opinion, yes, but not cut and dried "law".  

          Your weak hammer is wearing out; take it elsewhere.

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