Friday, September 20, 2013

Those evil shareholders!

It seems that I cannot go a week without reading some article about how evil shareholders are. Taking all the profits for themselves and paying the employees a slave wage. Issues of morality are brought up that its not right. The shareholders are greedy at the expense of the employees.

Most recently this came up when Walmart (WMT) threatened to not build anymore stores in Washington DC if they raised minimum wage from $8.25 to $12.50. The law was only for large big box stores, smaller companies were exempt. Cries of greed and evil flew through comment streams on the news sites. Setting aside the fact that these same people have 401ks that own an equity ETF that owns WMT, lets take a look at this greed...

Walmart has 2 million employees. Lets assume they work 30 hours a week for Walmart to avoid paying health care. 1,560 work hours a year would mean that for every $1 raise Walmart has to come up with $3.12 billion. We need to find $13.26 billion to cover the raise to $12.50.
Walmart paid $6.12 billion in dividends so if they took 100% of my pay as a shareholder we are still less than halfway there. Google Finance shows WMT profit margins to be about 3%-5% and thats about the number I hear on earning calls too. So there probably aren't any cost cutting measures involved and if you have shopped in a Walmart you already knew that.

The only place I see the money for an employee raise coming from is if they raise prices and the burden is put on the commenters calling investors greedy. If the average consumer was pure of heart they would have shopped at other stores that pay a better wage but charge more for the same goods, like say, all the stores that closed because they lost their shoppers to Walmart.
Where is the morality now?

I have no love of Walmart. I hate how they treat employees. I do my personal shopping at Costco and Kroger for groceries and Target for most other things. I will not give Walmart my business. So how can I justify owning Walmart shares in the blog portfolio?
Because all the hypocrites calling Walmart evil can't stop spending their money there which in turn is a dividend to me.
I love how Costco treats their employees but I can only get a 1% yield from them.
Target has a comparable yield to Walmart but their growth plans are building a few stores in Canada.
Walmart's plans include buying entire chains in South Africa and Brazil and building a Walgreen's sized store with a pharmacy.

Most middle class people have a choice. They can be an employee at the bottom of the pecking order and complain about being abused and how someone else needs to fix things.
Or they can choose to become the boss as a shareholder. That though is the topic for my next entry...


Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

5 comments:

  1. Every time I hear someone complaining about being gouged at the gas pump I remind them that they ought to buy shares of CVX, XOM, COP, or a similar oil company.

    Easy solution. Deaf ears.

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  2. Well written Pully ...

    You are actually tempting my writing urges a bit ...

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  3. I like this article. Over the past few years I have traveled for Wmt setting up new smaller stores for the real estate division. I enjoy working with people which is why I am now a co-manager.

    I run my store as a business. And I treat my 400 employees with great respect. I have been to hundreds of stores and can tell you most people who don't like the company simply have bad-managed stores around their homes and haven't been to any of the good ones.

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  4. If an employee chooses to stay with Wal-mart over the long term they do give every opportunity to move up in pay and position. Just to say Wal-mart doesn't treat there employees well is a myth. Sure are there part-time workers? Yes but a lot of these positions are for young and older people who are not looking to work max hours. I started in high school working for Wal-mart and they treated me good and used that experience during other jobs and careers in my life.

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