The gap between Wall Street and Main Street continues to widen in the midst of the coronavirus pandemic, furthering inequalities that have become so obvious and unfair that socialist ideas like nationalization of businesses and wealth taxes are making a fast comeback.
While most of us are aware of the destruction brought on by socialism over the last 70 years — more recently in Venezuela, which used to be a wealthy and advanced country — these ideas are becoming increasingly enticing to those who are uncomfortable with the wealth gap and corporate behavior that is contributing to economic inequality.
But there are several viable alternatives. Take, for one, a policy that could be implemented by public companies — and led by those at the top.
In 2019, the median full-time U.S. worker at Amazon earned $36,640. Meanwhile, between mid-March and early July, Amazon’s market capitalization increased by roughly $550 billion. Today, every employee at the company could receive $100,000 in shares, representing only about $84 billion, or less than 6 percent of the company’s total market cap. Imagine what that would mean for things like paying medical bills, buying a house, and saving for college. Similarly, Alphabet — Google’s parent company — could give $1 million in shares equally to each of its employees for only about 11 percent of its current market cap.
“Equally to each” is most important here, because compensation has become hopelessly biased to the top, often in ways that have nothing to do with performance and make plain certain failures of traditional capitalism and corruption in corporate governance.
To reduce the gap between Wall Street and Main Street, to reduce inequalities, is simply to share more equally wealth creation with the workers who make that wealth creation possible. We don’t need to break the system down, or create additional agencies; we just need to share capital more equally and actively with employees.
Of course, companies have proven time and again that corporate wealth creation can improve the world by spurring new solutions to problems. But if we forget who the biggest contributors to this wealth creation are, we can expect the Third Estate to revolt, and it would be a revolution totally of our own making.
And taxes are not the solution. In 2018, France for the second year had the highest taxes among OECD nations (46 percent of GDP, compared with 24 percent in the U.S.). Meanwhile, French billionaires increased their wealth last year by more than double that of their American and Chinese counterparts while yellow vests demonstrated in the streets.
Recognizing that all employees are needed, not just in lip service but through concrete actions such as share distribution, can only be good for business. Dilution for existing shareholders, even when repeating distributions, would remain small and progressive.
Of course, certain details and processes must be put in place, but we have to keep it simple to avoid disruptions and distortions of purpose. Likewise, companies don’t need to distribute shares at scales reaching 5 percent to make such a plan effective. In that vein, why not put the plan into action as follows: 1 percent of market value distributed in shares, equally to all employees every year. Join the 1 percent — for all!
Jerome Nollet WG85’s experience around the world has led him to hold memberships with Wharton alumni clubs in Boston, Paris, São Paulo, and London. He is active in mentoring young people, a member of several angel investing clubs, and a sailor.
