Lenore Palladino is an assistant professor of economics and public policy at the University of Massachusetts Amherst and a fellow at the Roosevelt Institute. The opinions expressed in this commentary are her own.
As the nation's largest private employer, Walmart could lead the way during the Covid-19 crisis in treating its employees like the essential workers that they are. The company's shareholders have a chance to take an important step in the right direction by backing a proposal from Walmart employees to add employee representation to the company's board of directors.
These employees are calling for shareholders to add hourly associates to the director slate that the board regularly puts forward as new board members. Investors who care about the company's resilience and long-term financial health should support this shareholder proposal.
Frontline employees are a key corporate stakeholder whose perspective must be heard when companies have to decide how to invest their resources and respond to economic challenges. The board of directors, as the critical decision-making body for the company, needs to consistently consider these perspectives on how the company should improve its day-to-day operations, how to weigh the impact of various corporate responses on customers and employees and how to help the Walmart board live up to its obligation to think about the long-term health of the company -- not just its short-term share price. Worker representation on the board would also help create a stronger flow of information between the associates working in the stores and long term shareholders, who share an interest in maintaining Walmart's financial health.
The most important myth to dispel for American shareholders is that worker representation on corporate boards will hurt the bottom line because workers do not have the best interests of the company at heart, and instead will only look out for themselves. Employee representation on corporate boards is commonplace in Europe -- especially in Germany, with its world-class manufacturing sector. Recent studies have found that employee representation has a positive impact on capital formation in large German corporations and that industrial relations between management and employees are stronger with worker-board representation in place.
Doug McMillon, Walmart's CEO, is now chairman of the Business Roundtable, which last summer declared that a company's purpose should be to balance the interests of all of its stakeholders, including workers.
Looking back, Walmart's board could have made different financial choices and could have responded more rapidly to the pandemic in a way that would have protected workers and shoppers earlier on. In the past, Walmart's board, like directors throughout the corporate sector, have also kept stock prices rising through artificial tactics like stock buybacks. The board has authorized billions in spending on stock buybacks over the last five years while the average Walmart worker still lived at the poverty line. The billions spent on stock buybacks could have helped to provide workers with more resources to weather the effects of the pandemic.
Moving forward, Walmart's board should at minimum institute hazard pay for the duration of the pandemic and provide the decent wages and paid leave benefits that its workers have long called for. These reforms, and those that will strengthen the company for the long term, will be all the more possible with employee board representation.
Worker representation on Walmart's board is not a panacea for solving the challenges the company faces, but it will help shift Walmart's board's focus from short-term share prices to long-term resilience.
