Half a century ago, a typical Sears salesman could walk out of the store at retirement with a nest egg worth well over a million in today’s dollars, feathered with company stock. A warehouse worker hired now at Amazon who stays until retirement would leave with a fraction of that.
Much as Sears has declined in the intervening decades, so has the willingness of corporate America to share the rewards of success. Shareholders now come first and employees have been pushed to the back of the line.
This shift is broader than a single company’s culture, reflecting deep changes in how business is now conducted in America. Winner-take-some has evolved into winner-take-most or -all, and in many cases publicly traded companies are concentrating wealth, not spreading it. Profit-sharing and pensions are a rarity among the rank-and-file, while top executives take home an increasing share of the spoils. Amazon shareholders have benefited more than workers, but Sears, in its heyday, tried to serve both.
The company earmarked 10 percent of pretax earnings for a retirement plan for full-time employees and by the 1950s, the workers owned a quarter of Sears. By contrast, one man at Amazon, the founder and chief executive Jeff Bezos, owns 16 percent of the company and is ranked as the world’s richest person.
Amazon, which changed how Americans shop much as Sears did in its prime, does not disclose what percentage of its stock is owned by employees. But this month, Amazon stopped giving stock to hundreds of thousands of employees, even as it lifted its minimum hourly wage to $15. While the raise garnered headlines, the move to curb stock awards may ultimately be more significant.
Not only does it reverse what had been an unusually broad employee stock ownership program, Amazon’s decision underscores how lower-paid employees across corporate America have been locked out of profit-sharing and stock grants. “What’s happened is that shareholders’ interests have squeezed out other stakeholders,” said Arthur C. Martinez, who ran Sears during the 1990s and was credited with a turnaround. “The mantra is shareholders above all else.”
Decades ago, he said, “the people who produced or sold the product were more central than the people in the corporate suite. There was a different mind-set and it’s linked to the larger issue of income inequality.”
Not only was Sears’s program generous, it was also remarkably egalitarian. Contributions were based on years of service, not rank, and the longest-serving workers received nearly $3 for every dollar they contributed. The company phased out the profit-sharing plan beginning in the 1970s. This month, after years of lackluster attempts at revival, the retailer filed for bankruptcy protection.
Companies like Procter & Gamble, S.C. Johnson, Hallmark Cards and U.S. Steel all embraced profit-sharing and were part of a corporate movement to encourage the practice, he said.
Among some leading executives in the early to mid-20th century, Professor Blasi said, “there was a notion that wages were not enough and workers had a right to share in the fruits of their labor.”
In the executive suite, however, profit-sharing still flourishes. While 68 percent of workers who earn more than $75,000 benefit from it, only 20 percent of workers earning less than $30,000 do, according to Professor Blasi. The decline of profit-sharing for the latter group has accelerated in recent years, with the median annual grant falling to $300 in 2014 from $921 in 2002.
There are Amazon employees who hold a lot of stock. Four out of the top five executives earned less than $175,000 each in annual salary in the last three years, but got tens of millions of dollars in stock.
By present-day standards, Amazon is relatively generous. In addition to 401(k)’s, full-time employees receive medical insurance and a week of paid vacation their first year.
Fifty years ago, Sears provided all of that plus a much larger annual retirement contribution. While the typical Amazon employee receives $680 from the company in a 401(k), the average Sears worker got the present-day equivalent of $2,744. Dividends on accumulated stock could add thousands annually.