By TOM WILSON
Chief Executive Officer
American businesses are sending a clear message: They need to focus on doing more than making profit.
Last week, the Business Roundtable, which represents the largest corporations in the United States, published a new, broader statement about the purpose of business, declaring that delivering shareholder value is not enough. The United States Chamber of Commerce, which represents three million businesses, revised its purpose last year to focus on job creation.
That said, accomplishing these aspirations requires more dialogue and action, and there is much more that we can do. Investors in these companies should ask management and boards of directors to focus on jobs. American businesses prosper by asking tough questions, creating specific goals and executing plans. This must now be applied to creating higher-paying jobs.
Boards need to raise specific questions to chief executives:
• Should we locate jobs in the same country where customers live, even if it makes prices higher?
• How do we count jobs created by suppliers?
• How do we determine whether wages are fair relative to the value created?
At Allstate we began this journey in 2016, when we raised our minimum wage to $15 an hour. That gave 2,900 people an immediate income boost. To address our broader responsibilities, we created a Prosperity Report to replace the annual financial report. Other companies are pursuing similar paths, and we all need to do more.
MOST AMERICANS ARE STRUGGLING
I write this at a time when most Americans are struggling. Sure, the unemployment rate is near a record low, but that figure masks the fact that many families are not financially secure.
A 2017 survey by the Federal Reserve Board showed that 40 percent of Americans do not have $400 for an emergency. We all have relatives, friends and acquaintances who are struggling to keep up.
Being broke while working is not an American value. Poor financial health creates stress, reduces hope and undermines capitalism. It is a cancer waiting to metastasize.
Americans need higher-paying jobs. Businesses have the resources and capabilities to make this a reality. Manufacturers take iron rocks and make steel skyscrapers. Pharma companies use chemistry to turn ordinary elements into lifesaving drugs. Service companies combine the ideas and talents of individuals to create meaningful work. Yet with all this goodness, the underlying philosophy of capitalism is under attack. How can this be?
According to a 2018 Gallup poll, less than half of young Americans today support capitalism. This reflects the fact that business is not fully meeting society’s expectations: serving customers, making a profit, creating jobs and improving communities. Businesses are serving customers well and making good profits. But there is not enough focus on creating jobs that provide a living wage.
PRIORITIZING PROFITS OVER JOB CREATION
While most corporate leaders may not agree with Milton Friedman’s philosophy that “the social responsibility of business is to increase its profits,” most businesses do prioritize profits over job creation. I have been in many board meetings over the past 30 years, and without exception, profit has been discussed at all of them. It is rare to discuss jobs, however, despite the fact that 56 percent of Americans believe creating jobs should be a top priority for business. In comparison, just 34 percent believe making a profit should be a top priority.
Raising the minimum wage for existing jobs will certainly help, but some jobs simply do not create enough value to be high paying. More jobs with higher sustainable wages are needed. This need is going to increase over the next decade as automation and artificial intelligence affect every job in America. Many jobs will be eliminated or made less valuable, putting downward pressure on wages.
When I ask my peers whether they consider this an important issue for society, they emphatically say yes. When I ask them whether they discuss this at board meetings, they say no. The blame for this inconsistency is usually placed on investors’ demands for profits.
HOW ARE YOU GOING TO GET THEM TO BUY CARS?
I heard a story about Walter Reuther, the legendary union leader, walking through a Ford Motor plant in Cleveland that was becoming mechanized. A Ford official pointed to some new machines and asked him, “How are you going to collect union dues from these guys?” Mr. Reuther thought for a moment and responded, “How are you going to get them to buy Fords?”
The point is well taken. Businesses need to give customers the best products at the lowest price. At the same time, they need to create jobs so that there are customers for the products produced.
What is good for the worker is good for the American economy. What is good for the economy is good for investors.
Let’s create more high-paying jobs and restore faith in capitalism. Corporate leadership and boards, put jobs on your agendas. Investors, ask companies how they are helping Americans prosper while creating a profit. Demand more of management. Delivering higher income through better-paying jobs would be the best tribute to American workers and will restore prosperity to every family and community in America. For American businesses, that is our history. That is our role. It must be our future.
(Tom Wilson is the chairman, chief executive and president of the Allstate Corporation and chairman of the executive committee of the United States Chamber of Commerce. Reprinted from the New York Times.)