Magazine article Risk Management

The Implications of Income Inequality

Magazine article Risk Management

The Implications of Income Inequality

Article excerpt

NIGEL TRAVIS IS THE CHAIRMAN AND CEO OF DUNKIN' BRANDS, THE PARENT COMPANY OF DUNKIN' DONUTS AND Baskin-Robbins. And as of his July appearance on CNNMoney, where he commented on the news that New York's Wage Board recommended that fast food workers earn $15 per hour, he is also an internet meme. A picture of Travis has circulated on social media with the caption, "Dunkin Donuts' CEO says $15 an hour is 'outrageous.' He makes $4,889 an hour."

Several articles in major newspapers have also criticized Travis with headlines like "Dunkin' Donuts CEO tone deaf on minimum wage" in The Boston Globe and "Dunkin' CEO says raising minimum wage to $15-per-hour is 'absolutely outrageous'...as he lives in mansion and makes $10 million per year" in the Daily Mail. Seattle Times columnist Jon Talton went so far as to call Travis "the best advocate for the $15 minimum wage," writing that "when high-paid executives get hysterical about improving the pay of their workers, it doesn't help their case."

Nigel Travis is not the first corporate leader to be targeted by advocacy groups and the media for a compensation package that dwarfs those of the company's workers, and he certainly won't be the last. In August, the Securities and Exchange Commission adopted a final rule that will require every public company to disclose the ratio of their CEO's total compensation compared to that of the organization's median worker. Although the rule does not go into effect until the fiscal year beginning Jan. 1, 2017, its adoption has already drawn concern throughout the business community. Considering the uproar stemming from Travis' brief commentary on a proposed minimum wage increase, corporate leaders must assess all of the risks that can stem from the increasing focus on income inequality.

THE CONTEXT OF INCOME INEQUALITY

While the United States has always been an economically unequal society, most economists agree that inequality has been increasing since the 1970s. According to the Economic Policy Institute, a nonprofit and nonpartisan think tank, the CEO-toworker compensation ratio was 20:1 in 1965 and grew steadily to almost 296:1 in 2013. Meanwhile, Emmanuel Saez and Gabriel Zucman, economic researchers at the University of California, Berkeley, found that the share of all wealth owned by the richest 0.1% of Americans has grown from 7% in 1978 to 22% in 2012.

Until recently, many Americans seemed not to know or care about the growing divide in income and wealth. Even at the height of the so-called Great Recession in 2009, only 47% of Americans polled by Pew Research agreed that there were "very strong" or "strong" conflicts between the nation's rich and the poor. By late 2011, that figure had grown to 66%. Since then, income inequality has become a regular topic of political debate and public discourse.

Many observers attribute the increasing focus on wealth and economic inequality to the Occupy Wall Street movement that began in New York City's Zuccotti Park in September 2011 and spread to cities and towns across the country. Although the protestors were derided at the time for not outlining a clear platform of demands, their efforts to provoke public discussion about income inequality and the divide between the 99% and the 1% has had a lasting impact.

Less than a year later, in November 2012, approximately 200 fast food workers in New York went on strike, demanding a $15 minimum wage in what was then the largest labor action in the industry. The "Fight for 15" movement grew from there, holding strikes and walk-outs, filing lawsuits over wage theft, and generally keeping the issue of income inequality prominent in the media. On April 15, 2015, roughly 60,000 workers in more than 200 cities across the United States took part in the largest coordinated protest by low-wage workers in history. By then, the movement had grown beyond the fast food industry to include home-care workers, child-care staff, security guards and anyone who earned less than what they considered to be a living wage. …

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