Corporate Greed - How Much is Too Much?

[CConn]

So recently I've taken an interest in trying to think of economics questions that I really haven't heard anyone ask before in the main discourse of, well, everything.

A recent one I've been thinking about is in regards to profit margins. All the time now, people lament about major corporations paying impossibly low wages to its low level employees while pocketing billions in profits.

So it got me thinking, if the corporate world was completely in our control, what would a fair profit margin be for a major corporation? 20%? 10%? 1%? What's a decent margin for a company to pay it's employees fairly, while still making enough of a profit to continue operating?

 

[moviedoors]

You make more than a billion a year in profit, you pay your people a living wage at minimum. I'm looking at you Walmart, McDonalds, etc.

 

[DeadPresident]

The idea of a "major corporation" is inherently flawed. I like your questions though, but I think they should include notions of social responsibility in addition to purely financial considerations. Besides major corporations not paying their employees enough a lot are responsible for other negative outcomes that if they could be financially quantified would also make people sit up and notice.

On the profit margin topic I'd say that if a company makes X% profit a year, a certain percentage of that profit should be split precisely in equal shares amongst all the employees of the company. Using moviedoors' figure, let's say half (for arguments sake, my numbers might be horrendously flawed, maybe 25% or 10%) of that $1 billion gets distributed equally among all the employees of that company, I'm not sure how many employees Walmart has but I'm assuming it's in the tens of thousands.

 

[hippie_hunter]

You make more than a billion a year in profit, you pay your people a living wage at minimum. I'm looking at you Walmart, McDonalds, etc.

While one can criticize Wal-Mart, you can't put McDonald's in the same league. Unlike Wal-Mart, the vast majority of McDonald's restaurants are owned and operated by independent owners. And these owners aren't making a billion dollars let alone in profit.

It's why McDonald's is so profitable, because they don't have to take care of the men and women who work in the restaurants with their brand, because they're not McDonald's employees.

 

[SV Fan]

How dare you question the almighty job creators.

 

[Pink Ranger]

Big corporation underpays employees = high turnover of employees.

High turnover of employees = increased staffings costs, due to frequency of recruitment and training + feeding trained employees to a competitor who only slightly needs to do better than you.

Increased staffing costs + feeding your competitor = lower profit margins, less cash to your shareholders.

Lower profit margins = lesson in how capitalism polices itself.

 

[The Question]

Big corporation underpays employees = high turnover of employees.

High turnover of employees = increased staffings costs, due to frequency of recruitment and training + feeding trained employees to a competitor who only slightly needs to do better than you.

Increased staffing costs + feeding your competitor = lower profit margins, less cash to your shareholders.

Lower profit margins = lesson in how capitalism polices itself.

And yet big corporations still underpay employees. I think capitalism is really terrible at policing itself.

 

[moviedoors]

While one can criticize Wal-Mart, you can't put McDonald's in the same league. Unlike Wal-Mart, the vast majority of McDonald's restaurants are owned and operated by independent owners. And these owners aren't making a billion dollars let alone in profit.

It's why McDonald's is so profitable, because they don't have to take care of the men and women who work in the restaurants with their brand, because they're not McDonald's employees.

I hadn't considered that, so I'll back off on McDonalds, but Walmart? They can go to hell. I use to be a manager there and I was privy to the daily revenue stream. Our store saw roughly 1/5 to 1/4 of a million dollars a day and they not only told us we couldn't afford to hire more people, but in fact had to cut hours. Walmart exemplifies corporate greed. There were managers there who made less than 9 bucks an hour while our head manager was making a six figure annual bonus on top of her outrageous salary. Walmart's SOP is work your people to the bone, pay them crap, and then replace them when they complain. It's a race to the bottom. If you want to know why their shelves are always empty it's because they cut normal associate hours so far that management has to take up all the slack, showing up at 5 am to unload trucks with a manual pallet jack (because they're too cheap to buy electric ones) and stock the shelves on top of keeping up with inventory and the day to day operations that keep a store running. I currently work with animals, which entails wading through drool, feces, piss, and hair in weather that ranges from freezing to heat-stroke inducing and my workload isn't even close to killing me the way Walmart's did. And my pay was a joke. It disgusts me.

 

[hippie_hunter]

I hadn't considered that, so I'll back off on McDonalds, but Walmart? They can go to hell. I use to be a manager there and I was privy to the daily revenue stream. Our store saw roughly 1/5 to 1/4 of a million dollars a day and they not only told us we couldn't afford to hire more people, but in fact had to cut hours. Walmart exemplifies corporate greed. There were managers there who made less than 9 bucks an hour while our head manager was making a six figure annual bonus on top of her outrageous salary. Walmart's SOP is work your people to the bone, pay them crap, and then replace them when they complain. It's a race to the bottom. If you want to know why their shelves are always empty it's because they cut normal associate hours so far that management has to take up all the slack, showing up at 5 am to unload trucks with a manual pallet jack (because they're too cheap to buy electric ones) and stock the shelves on top of keeping up with inventory and the day to day operations that keep a store running. I currently work with animals, which entails wading through drool, feces, piss, and hair in weather that ranges from freezing to heat-stroke inducing and my workload isn't even close to killing me the way Walmart's did. And my pay was a joke. It disgusts me.

In my opinion, there is no such thing as too much. In a way Gordon Gekko's "Greed is good" speech does have some sound basis. The whole speech going: "Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed," is absolutely accurate IMO.

There is nothing wrong with Google making almost $13 billion in profit. There is nothing wrong with Walmart making almost $17 billion in profit. Or ExxonMobil making almost $45 billion in profit. And there is nothing wrong with wanting to strive for more.

The problems come not from the amount of money these people they're making, but from the actions they're taking in making this money. Your post about Walmart is the perfect example of a company acting incredibly immoral about how it makes its money. Monsanto is another example of this. However, I'm not going to complain about the way Google makes its money.

The problem isn't greed, the problem is corporate morality and a system that allows companies to go from Google's mantra of "Don't be evil" to Walmart's mantra of being as immoral as possible.

 

[The Question]

I have no problem with a company making billions of dollars. What I have a problem with is the people at the very top hoarding most of it for themselves and leaving their employees with scraps. I would seriously support a law that would force companies of a certain size to cut their highest salaries before they ever started downsizing in order to offset costs. Hell, I would support a federally mandated maximum wage. Neither will happen at any point in the foreseeable future, but that's where I stand. If you're raking in over a million dollars a year and your average employee can't even support themselves, you're an *******.

 

[The Overlord]

In my opinion, there is no such thing as too much. In a way Gordon Gekko's "Greed is good" speech does have some sound basis. The whole speech going: "Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed," is absolutely accurate IMO.

There is nothing wrong with Google making almost $13 billion in profit. There is nothing wrong with Walmart making almost $17 billion in profit. Or ExxonMobil making almost $45 billion in profit. And there is nothing wrong with wanting to strive for more.

The problems come not from the amount of money these people they're making, but from the actions they're taking in making this money. Your post about Walmart is the perfect example of a company acting incredibly immoral about how it makes its money. Monsanto is another example of this. However, I'm not going to complain about the way Google makes its money.

The problem isn't greed, the problem is corporate morality and a system that allows companies to go from Google's mantra of "Don't be evil" to Walmart's mantra of being as immoral as possible.

I think greed also makes people do foolish things, one only has to look at the worst of reality TV to see that.

Greed is part of human nature, I would argue a dark part, but its still there. But its something you have to moderate, otherwise it can lead you to ruin.

It does seem like some people say rampant greed is a good thing and I do think there is a reason why greed is considered a vice. Greed is something that easily become destructive.

I think there are would less call for more regulations if more corporations were better at policing themselves, but a lot of them have failed that test. Corporations cannot complain about regulations, when many corporations make destructive decisions based on short term gain.

 

[chaseter]

It doesn't matter how much a corporation makes...they can make a trillion. I don't care. What matters is how much they are taxed. Too many loop holes and subsidies for billion dollar corporations. It's disgusting.

 

[hippie_hunter]

The corporate welfare certainly needs to end.

 

[SV Fan]

The corporate welfare certainly needs to end.

But how will all the money trickle down to us lowly beings if we don't give them tax breaks?

 

[hippie_hunter]

But how will all the money trickle down to us lowly beings if we don't give them tax breaks?

It's not just the tax breaks, it's also the bailouts and supporting unnecessary things like corporate jetliners and whatnot.

 

[SV Fan]

It's not just the tax breaks, it's also the bailouts and supporting unnecessary things like corporate jetliners and whatnot.

Yeah but that cash in the end somehow ends up in our hands, or so Ronny Reagan told us.

 

[chaseter]

That was when we had corporate fledglings in a very much different economy. Facebook doesn't need subsidies.

 

[hippie_hunter]

Yeah but that cash in the end somehow ends up in our hands, or so Ronny Reagan told us.

Reagan was only using the precedents set by Coolidge, Hoover, and JFK.

 

[Feenix]

Well, like Jeff Skilling once said to his university professor, "I am f****** smart."

These guys at the top are generally quite smart. They're smart enough to hire lawyers and accountants that are smarter than they are and that know the legal loopholes they can exploit to make more money. The crazy thing is, these loopholes are so complicated and so convuoluted (derivatives anyone?) that no judge or prosecutor would be able to find a broken law in there because they can't even understand it. It's why white collar crime is so profitable (it rakes in about $600 billion a year). White collar crime destroys more lives than street crime ever could, but no one pays for it because no one can prove exactly which laws were broken by whom.

Companies like Wal-Mart have exploited every possible loophole and have been helped by a society which values greed over compassion and money over livelihood.

 

[Motown Marvel]

i always liked how the CEO of WholeFoods is allowed allowed to make a certain percentage more than the company's lowest paid employee. Therefore, if the CEO wants a raise, then everyone gets a raise.

Corporate wellfare clearly needs to end. Sports arena's need to stop being government subsidized. Seriously, as if the NFL can't afford to build its own stadiums.

Would it make sense to have a tiered minimum wage system where a businesses minimum wage is dependent on it's revenue?

 

[chamber-music]

Personally I don't care how much a company makes as long as its legal and not exploitive or bullying. If you use your profits to expand your business or invest in your business that is fine.

I do think large companies that make huge profits yet only the top people get any rewards from that is slightly immoral. If I was a CEO and my company was making huge sustainable profits and doing well then I would certainly raise the payroll a little for the folks on the lower levels of the company.

 

[Sun_Down]

If a company, like McDonald's, doesn't pay its workers a decent wage, then guess what? We, the taxpayers, subsidize their wages through public assistance programs.

Shouldn't this be getting the conservatives all riled up? I mean, they HATE subsidies, right? And even if McDonald's has to raise prices, then so what? Isn't it more equitable for the consumers of the product to pay for the increase in labor costs, as opposed to everyone - even those who never touch fast food - picking up the tab? These exact same arguments are being made in the healthcare debate ("I don't wanna pay for no birth control!"), but somehow the "party of personal responsibility" is silent on this one.

That's why you need things like minimum wage laws. Because the free market will never correct a situation like McDonald's, at least not in a down economy. People will still line up around the block to work for $7.25/hour.

 

[hippie_hunter]

That is such a absolutely stupid argument. I can certainly respect when people argue in favor of raising wages and whatnot, but this latest argument about how we're "subsidizing" Wal-Mart and McDonald's is just so intellectually shallow. It's so shallow that I kinda expect that kind of crap to come from the right, not the left.

 

[Sun_Down]

That is such a absolutely stupid argument. I can certainly respect when people argue in favor of raising wages and whatnot, but this latest argument about how we're "subsidizing" Wal-Mart and McDonald's is just so intellectually shallow. It's so shallow that I kinda expect that kind of crap to come from the right, not the left.

Always appreciate being called stupid by the mods around here. Such a classy example of how to conduct yourself.

Instead of actually addressing the merits of the argument, you're just going to throw around conclusory statements about shallow the argument is? That's literally intellectually shallow. "You're wrong, but I won't/can't explain how."

 

[hippie_hunter]

I'm not saying that you're stupid, but it's just such an intellectually shallow argument to use in favor of raising the minimum wage when there are so many better ones to use (like how we're improving the purchasing power of the poor for example or even the simple morality of it). There is no subsidization going on with the low wages. We're not giving these companies subsidies to pay for the health care of their employees. Saying how we're subsidizing Walmart for low wages is as intellectually dishonest as the right's arguments against Obamacare claiming that it is socialism or whatnot.