THE BLOG

Is the American Dream Out to Lunch?

05/06/2013 04:33 pm ET | Updated Jul 06, 2013

As an investor in Darden, the restaurant behemoth that operates national chains such as Olive Garden and Red Lobster, you'd think the Nathan Cummings Foundation would celebrate that a company we partly own was once again featured in the "Great Place to Work" corporate conference this year. After all, motivated employees are the bedrock of creating success, especially in the restaurant industry, where great service translates to more satisfied customers and greater profits for shareholders like us.

Unfortunately, when you talk to some of Darden's 185,000 employees about their workplaces -- especially those working directly with customers in restaurants -- you hear very different stories than what was told by Darden executives at "Great Place to Work." Great places to work shouldn't have employees on modern-day food stamps and food service workers in particular shouldn't be forced to work while sick or without health insurance that helps them get better.

So it was with some measure of irony that we learned about the Darden executives' presentation, "The American Dream is Alive and Well in Corporate America: A Case Study." This case study neglected to lift up Clarence Otis, Darden CEO, whose pay package of roughly $8 million has been condemned by the leading corporate ratings provider, GMI.

By contrast, many of Darden's rank and file employees are less well-off. Many Darden employees are hired at the minimum hourly wage of $2.13, a shockingly low figure that is kept there thanks to the lobbying power of the National Restaurant Association, financed by Darden and its peers. Nationally, the average yearly wage for food and beverage workers is $18,130. That's two-tenths of one percent of what Otis cleared in 2012, and well below the federal poverty line for a family of three. Sadly, these food workers qualify for modern-day food stamps at higher rates than the rest of the work force.

You might think that given most servers' proximity to the public's food and drinks, restaurant groups like Darden would provide paid sick days, but you'd be wrong. Darden and its lobbyists have repeatedly fought laws requiring paid sick time for the workers who serve and prepare the food eaten by restaurant goers. It should concern to investors when customers are potentially put at unnecessary risk. And while executives have health insurance and can afford a trip to the doctor, the same cannot be said for many of Darden's rank and file.

In light of the new health care law, Darden announced a plan to cut employee hours to evade the requirement in the law to provide coverage to those working 30 or more hours per week. They later dropped the plan, but perhaps if Darden executives had spent more time building the business and less time scheming to undermine their own employees, the company would not have missed analysts' earnings estimates and a 37 percent drop in net income for its fiscal second quarter. Darden's CEO acknowledged that media coverage of their attempts to limit health insurance had been a factor in the drop.

While some might think shareholders would applaud low wages and poor benefits for keeping costs down and creating bigger dividends, Darden's shareholders increasingly see that our investment faces far greater risks due to sick employees, high turnover and poor morale that will drive away customers.

There is a tremendous opportunity for Darden to grow and truly become a great place to work. The first step is to sit down with its own employees and investors to chart a path for growth based on reasonable standards that will limit turnover, improve customer service and make the promise of the American Dream much more than just lofty rhetoric at a trade conference.

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