When Sears Flourished, So Did Workers. At Amazon, It’s More... https://www.nytimes.com/2018/10/23/business/economy/amazo...

When Sears Flourished, So Did Workers.

At Amazon, It’s More Complicated.
By Nelson D. Schwartz and Michael Corkery

Oct. 23, 2018

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.

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[Here’s why some Amazon workers are fuming about their raise.]

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.

Sears was hardly alone in corporate America, said Prof. Joseph R. Blasi, who
directs Rutgers’s Institute for the Study of Employee Ownership and Profit
Sharing.

Companies like Procter & Gamble, S.C. Johnson, Hallmark Cards and U.S.

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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.

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During its heyday, Sears offered workers generous stock grants, as shown in this 1957
statement. Sales employees at the retailer could retire with nest eggs that would translate
today to well over $1 million. Courtesy of Joseph R. Blasi

Company contributions to the Sears profit-sharing plan were based on years of service, not
position in the corporate hierarchy. Courtesy of Joseph R. Blasi

The Sears approach was not without flaws. By putting much of its assets into
company stock, it made workers even more exposed to their employer’s fate.
It also favored men over women, who lost out when they took time off or left
earlier than male colleagues, according to Sanford Jacoby, a professor of
management and public policy at University of California, Los Angeles.

Still, it was very popular with employees. “People were retiring with nice

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chunks of change,” Professor Jacoby said. “People loved this fund and Sears
was a wildly successful company.”

If Amazon’s 575,000 total employees owned the same proportion of their

employer’s stock as the Sears workers did in the 1950s, they would each own
shares worth $381,000.

Until this month, Amazon had been awarding two shares a year to warehouse
employees, worth about $3,500 at the current price. The loss of those grants
will prevent employees from directly partaking in one of the greatest
examples of wealth creation.

To make up for the lost stock grants, Amazon has provided raises of at least
$1.25 an hour to employees who had been earning over $15, plus cash bonuses
at five, 10, 15 and 20 years of employment. Employees can put 401(k)
contributions into Amazon shares.

Several employees interviewed, who insisted on anonymity because they were

not authorized to speak publicly, expressed disappointment. Amazon should
have saved the dollar and kept giving workers stock, said one warehouse
employee in Baltimore.

Amazon insisted workers were not losing out. “The significant increase in
hourly cash wages effective Nov. 1 more than compensates for the phaseout of
incentive pay and future stock grants,” said a company spokeswoman, Ashley
Robinson.

But that approach could make workers feel less connected to Amazon’s
success, said Jeffrey D. Shulman, a professor of marketing at the University of
Washington. “Going forward, it almost becomes a zero-sum game,” he said.
“Now when the company makes a decision, Amazon either puts money into
the pockets of shareholders or employees.”

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Amazon’s warehouse in Carteret. Until recently Amazon gave warehouse workers two
shares a year, worth about $3,500 at the current stock price.
Demetrius Freeman for The New York Times

The calculus was different at Sears, said Dan Fapp, a former communications
executive who worked there from 1963 to 1999. “If the company did well and
the stock went up, your account was worth more,” he said.

“It was not unusual for people to have $250,000 to $350,000 when they retired
in the 1960s and early 1970s,” Mr. Fapp said. That’s worth well over $1 million
today after adjusting for inflation.

At stores, there were also opportunities for salespeople to increase their base
salary through commissions. So-called Big Ticket Men, who sold more
expensive goods, earned the equivalent of nearly $50,000 a year.

Stanley Hreneczko, 91, started working at the Sears in Troy, Mich., in 1965. He
was a salesman in the appliances department — selling stoves and
refrigerators. Thanks to his generous pay and the corporate savings plan, Mr.
Hreneczko bought a home in cash and took summer vacations to Arizona and
Florida.

“It was like working in heaven,” he said.

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Even junior employees were well taken care of.

“Most of these people retired with a good pension,” said Jon White, who
worked at Sears for 38 years, most recently as a manager in a store in
Lithonia, Ga., before retiring in 2008. “Most of them are comfortable for the
most part — cashiers, clerks, replenishers, all kinds of workers.”

Jon White, who worked at Sears for 38 years before retiring in 2008, said the retailer
offered generous pensions that allowed workers to lead comfortable lives after they left the
company. Audra Melton for The New York Times

Even after Sears scaled back its profit-sharing plan, workers benefited from a
pension plan that held a diverse portfolio of stocks and bonds and provided
fixed payments based on their salaries and tenure at the company. With Sears
in bankruptcy, the federal government is expected to guarantee some or most
of those pension payments.

Unlike Sears, Amazon is growing rapidly and the company says it is working
harder to increase opportunities for promotion from the warehouse floor into
leadership positions.

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But its warehouses are staffed primarily by legions of lower-paid hourly

employees. Of more than 2,000 workers at its fulfillment center in Carteret,
N.J., all but 230 earn less than $17 an hour, or about $35,000 a year. During a
recent tour there, one worker, Julia Teran, said she had received six shares
during her three years at the company.

“I keep it for my retirement,” Ms. Teran, 58, said of her stock, which is worth
more than $10,000. How does she feel about the end of stock grants? “Things
change,” she said with a half-smile.

A version of this article appears in print on Oct. 24, 2018, on Page A1 of the New York edition with the headline: In Its Heyday, Sears
Spread the Wealth. Companies Today Don’t.

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