Walmart ((WMT) CEO Doug McMillon gave Harvard Business School graduation a dissertation on shareholder capitalism in his keynote address Thursday, in an environment where more and more people believe that the current system has failed.
“I think Winston Churchill was right when he said that democracy is the worst form of government there is, except for all the others that have been tried. I think the same about capitalism, ”McMillon said during his featured speech at HBS’s Class Day, the student-led ceremony.
The 54-year-old CEO of the company that has become the nation’s largest private employer and the world’s largest retailer noted that “it’s like flipping a coin because so many people believe that capitalism is working like so many that no ”.
“I have been told that this class thinks the same. I understand that they asked if capitalism had failed or not and the results were 50/50. The way I see it, capitalism is imperfect because humans are imperfect, “said McMillon.
In early 2020, McMillon assumed the presidency of the Business Roundtable shortly after the nonprofit association of nearly 200 American CEOs adopted a new “Company Purpose Statement” moving away from shareholder primacy to declare that “companies must not only serve their shareholders, but also provide value to their customers, invest in employees, deal fairly with their suppliers, and support the communities where they operate.”
McMillon, an Arkansas native who began his Walmart career as a high school student at just 17 years old loading trucks into a warehouse in the summer for $ 6.50 an hour, told business school graduates that “too many people they are lagging behind in today’s economy. “
“The place of birth or the color of your skin shouldn’t have such a dramatic impact on your chances. But they do. So how can we improve these systems, democracy and capitalism, to generate more equality, economic freedom and trust? These systems overlap. They are connected. And they both need to improve, ”added McMillon.
When it comes to capitalism, McMillon thinks that “more and more people are beginning to understand the importance of balance and systems design thinking.”
“Making a profit is not just a necessity, it is the oxygen that allows the investment. But emphasizing short-term profit maximization creates negative long-term consequences, ”he noted.
McMillon warned that companies “get in trouble when they start overthinking this quarter or even this year.”
“Balance is critical to life and business, but if you’re going to tip the balance, make sure you tip it for the long term,” he said.
According to McMillon, “investing for the long term can be a very difficult decision for companies.” The CEO noted that Walmart’s operating margin was 4.1% in the last fiscal year, which makes the retailer “quite sensitive to short-term investments.”
McMillon also noted that when the company announced that it was increasing the hourly wage of its associates, the stock price fell.
“In 2015, we announced that we were investing $ 2.7 billion in ‘associate’ salaries. We announced it during our annual investor conference within the New York Stock Exchange. We made the announcement around 9:45 in the morning and that same afternoon when operations closed we had lost more than $ 21 billion in market capitalization. In February of this year, we announced more salary investments along with an increase in capital investment for automation. The stock price was down 6.5% that day, ”McMillon told the graduates.
IMAGE DISTRIBUTED BY WALMART INC. – Walmart CEO Doug McMillon speaking to an audience of Walmart vendors and partners at the Walmart Product Sustainability Expo on Tuesday, April 29, 2014 in Rogers, Arkansas. Walmart began its Product Sustainability Expo, a three-day collaboration with its suppliers, to expand the availability of products that support people and the environment. Participating vendors represent more than $ 100 billion in sales at Walmart; which underscored the scale and scope of the Expo. (Spencer Tirey / AP Images for Walmart Inc.)
“Invest in our people”
Under McMillon’s leadership, the retailer has increased its salaries and expanded benefits for its employees. Yahoo Finance reported in February that Walmart increased the salaries of 425,000 of store associates in the storage and digital workgroups to a range of $ 13 to $ 19 an hour, depending on location and market. In September, Walmart raised the hourly wages of 165,000 of its associates at its supercenters. With the latest increase, Walmart now has about 730,000 associates in its US stores, about half its workforce, making $ 15 or more per hour.
Currently, Walmart pays a minimum wage of $ 11 an hour, except where the starting minimum wage is higher. As Yahoo Finance reported earlier this year, the median wage for its US workforce is at least $ 15.25 an hour, according to the retailer.
McMillon told the graduating class that the company is “convinced that investing in our people is smart business, just as we believe in our investments in communities and the planet.”
“The price of our shares during the last five years has doubled. We believe that it is proof that a multiple focus on shareholders with a more long-term view creates more valuable companies, ”he added.
To be sure, Walmart’s multiple focus on shareholders “has been a maturing process.”
“As a younger company, we focus on customers and partners. We believed that if we served them well, shareholders would benefit. But we didn’t see our entire system and its connection to communities and the planet as we see it today, ”said McMillon.
McMillon acknowledged that Walmart “faced a lot of criticism in the 1990s and early 2000s on different issues” and that the company “was offended and responded by defending us with quick facts and action.”
“That did not work and it was certainly not satisfactory,” he said. “Our CEO, Lee Scott, asked us instead to come face to face with some of our most staunch critics. He asked us to lower our guard, listen and learn… to find ways to improve. He advised us to focus on improving the company and suggested that we could retell our side of the story later. We meet and listen to people like Paul Hawken, Amory Lovins, Sister Barbara Aires, and the Reverend Al Sharpton. We read books on sustainability and went on field trips. Our mentality changed ”, he added.
He went on to recall how the company’s work in New Orleans in 2005 after Hurricane Katrina was a “watershed moment” for Walmart.
“The pride we felt during the following days opened a door to permanent change and we took advantage of that opportunity. We made a public commitment to social and environmental sustainability and we have been working on it ever since, ”he said.
McMillon continued his speech by touting some of Walmart’s latest commitments, such as its plans to be a zero-emission company across all of its global operations by 2040 and its $ 100 million investment in a Center for Racial Equality.
“I am not saying that we are perfect. Of course we are not. But we are excited and motivated to be able to use the size of Walmart to make a difference. We hope to play an important role in bringing people together. We aspire to be part of the fabric that strengthens the communities and countries where we operate ”.
Julia La Roche