For the past several weeks I have been writing about the need to raise the minimum wage as both a moral imperative for America as well as an economic one. As the Walmart debacle unfolded, I was almost convinced that this trend of thought is never going to take hold outside of commentary, but I was wrong. In my search to find a company that thinks differently, I was pleasantly surprised to find a leading company that has found a way to combine financial shrewdness with social responsibility and in the process, secure their own profitability and future.
Whole Foods, the large food retailer, pays its retail employees an average of $15 an hour which is more than double the minimum wage and enough to at least lift a full-time employee over the U.S. poverty line. The company also gives its employees benefits and options, which are usually reserved for senior management. Not only that, but their refreshing approach to business even has a name: conscious capitalism.
The word conscious implies the unique ability that living beings have to perform a task with a sense of intelligence and empathy, as opposed to mechanically -- which machines do. Capitalism, contrary to what some people think, is not the natural order of things, but simply a philosophy out of many other philosophies that we choose to apply in our nation; and as such it is perfectly within our right to modify and augment it in ways that benefit us, including adding the missing ingredient of consciousness. In fact, it may be the very thing that saves our system from recessions, depressions, and possibly a complete meltdown in the long run.
Let's be clear. Whole Foods is a business and not a charity, but what it is doing is also a brilliant business practice. What Whole Foods has clearly recognized is that their employees are not just workers but consumers as well; in other words, their customer base. By paying their employees decently, as opposed to the minimum they can get away with, they are not only earning the loyalty of those employees, but also arming them with the resources to be more active customers for their own products. In this way, whatever investment they make in their employees comes back to them in the form of increased spending by their customers. In addition, their philosophy of fair pay generates positive public relations for their company and wins them the hearts and wallets of all Americans. This simple principle adds profits to the enterprise, which in turn increases the value for shareholders.
Those who espouse Darwinian capitalism call their approach "Economics 101." Well, having taken plenty of economics courses in my life, I can safely say that the Whole Foods approach not only conforms to the fundamentals of economics but is far superior to what the Darwinians have to offer.
For one thing, the sharing of company ownership and profits with employees aligns their interests with those of the company and motivates them to do their best to help the business succeed. For another, the profit-at-all-costs model, which thrives on paying people as little as possible, can boost profitability in the short term but is damaging in the long term from the perspective of employee retention, customer service, and reputation. It is also incredibly damaging to the national economy, which pays the price for the gain of a few top executives and shareholders in the form of increased inequality (and the costs that go with that), lower consumer demand, and declining asset values. By ignoring the needs of employees, businesses are hurting everyone, including themselves.
And that is Economics 101.
Whole Foods has also consistently demonstrated its commitment to organic and natural food suppliers in the US as well as food producers in developing nations by paying them fairly for their labor and products. The company also contributes generously to philanthropy (at least 5% of annual profits) and is generally regarded as a leader in the area of social responsibility in addition to conscious capitalism. Behind all these policies is Whole Foods' belief that their fortune depends upon all their stakeholders, including their suppliers and the community.
Whole Foods may not change the world with their model, but they are certainly showing us the right way forward with their innovative thinking and responsible business stewardship, and neither are they alone. Zappos, Google, the Container Store -- all are experimenting with a better way to do business that benefits themselves and all their stakeholders.
Now it is up to the rest of America's companies to wake up and realize how the philosophy of conscious capitalism can benefit them, and the economy as well. Given the high level of discontent in the working class, the rapidly growing wealth gap, and the severely divergent interests of the rich and the poor, all of which were on stark display during the presidential elections, this may not even be optional.
SANJAY SANGHOEE has worked at leading investment banks and at a multi-billion dollar hedge fund. He has an MBA from Columbia Business School and is the author of a thriller titled "Merger", which Chicago Tribune called "Timely, Gripping, and Original". Please visit www.sanghoee.com for more details.
Follow Sanjay Sanghoee on Twitter: www.twitter.com/sanghoee