There was nothing inaccurate in what Wells Fargo & Co. said after a newspaper got ahold of an employee’s e-mail to the CEO asking for a $10,000 across-the-board annual raise — an e-mail copied to thousands of other employees.
Its statement said Wells Fargo “values and supports its team members.” Wells Fargo provides “market competitive” compensation with an annual review. Everyone’s pay “significantly” exceeds federal minimums.
What a blown opportunity.
Wells Fargo is in the business of helping people manage their money to live better lives. And it can’t think of anything better to say to a plea for fair pay than that it pays market-based wages that exceed federal minimum wage?
“That robotic response … to say ‘Well, we pay market rates with market-rate benefits,’ it’s just very disappointing,” said Teresa Daly, co-founder of executive leadership consultants Navigate Forward in Minneapolis. “Total, complete, missed opportunity.”
As Daly pointed out, one company can’t single-handedly fix middle-class wage stagnation. But with a little thinking, Wells Fargo could have come up with ideas that showed, both inside and outside the company, that its leaders wanted to work on the problem.
“Income inequality is a known fact,” she said, “and it’s widening every day.”
And it’s not like any deep research was needed at Wells Fargo into the topic.
The last time Bloomberg calculated the ratio of CEO pay to average worker pay, Wells Fargo came in 33rd among companies in the top half of the S&P 500 — with CEO John Stumpf’s 2012 compensation calculated at 473 times the average pay and benefits of bank industry employees.
The e-mail to Stumpf on rank-and-file pay — with its importance labeled “high” — came from 30-year-old Tyrel Oates, a full-time Wells Fargo employee in Oregon.
He reportedly makes just over $15 an hour, and he certainly has an interesting perch from which to observe the consumer economy. His job is to process cease-and-desist requests from customers being pressured by debt collection efforts.
He didn’t write Stumpf to ask for a raise, at least not directly. Instead he was pointing out an opportunity.
Wells Fargo could both acknowledge the issue of income inequality and break from the pack of other large employers by raising the compensation of its employees across the board — $10,000 per year for everyone.
That works out to an hourly bump of $4.71, or about a 30 percent raise for Oates.
Oates made sure people saw his e-mail, too. As he described to Business Insider, Oates took his lunch hour and breaks over the course of a couple weeks and composed 11 separate e-mails, filling in the CC line starting with every group e-mail distribution list he found in the company directory.
Then he worked his way alphabetically down through every individual address he could find. He estimated he reached 200,000 or so of Wells Fargo’s employees. It’s not known how many of the 20,000 or so the bank employs here in Minnesota got it.
“This person’s basically engaged in a form of organizing,” said Aaron Sojourner, professor of labor economics at the Carlson School of Management at the University of Minnesota. “Not necessarily by pushing for a union directly, but definitely trying to enlist his co-workers in this campaign to raise compensation.”
Sojourner finds it remarkable that Oates was able to contact 200,000 co-workers at once at no cost, likening it to the digital petition campaigns now possible through websites such as coworker.org.
To be fair, it would have taken some nontraditional thinking among Wells Fargo’s senior executives to immediately see Oates’ proposal as a great opportunity. None of them would have needed a calculator to work out the financial impact of implementing it.
If $10,000 is the raise, just to make the arithmetic easy, add a benefit cost rate of 20 percent. That would mean nearly $800 million per quarter in additional cost before taxes, or about a dime per quarter for a company that just reported $1.02 in third-quarter earnings per share.
It’s fair also to assume that Wells Fargo’s executives think they are paying competitive wages.
The perfect world assumption of a freshman economics class is that the market for labor is efficient and thus it’s easy to find out precisely what customer service staff should be paid. Yet the reality is far more complicated.
There’s also the economic concept of the “efficiency wage,” when employers voluntarily pay more than the “market-clearing” rate. There are lots of reasons for doing that, including raising the cost of getting fired so employees don’t shirk their responsibilities.
Another reason to pay over market is based on notions of fairness. An example is when a company’s software engineers get a raise because their skills are in very short supply, and then the mechanical engineers insist on getting one, too.
In the case of Wells Fargo, it might be a stretch to look at a job, like Oates’, processing cease-and-desist requests and decide it has to pay better because others have seen their salaries rise. It may also be a stretch to pay above-market rates to become an employer of choice, as a strategy for when the labor market gets tighter.
But if these ideas aren’t exactly no-brainers to accept, they at least seem to be reasonable things to discuss at the highest levels of a company like Wells Fargo.
What they are talking about at Wells Fargo isn’t for us to know. The company declined to even say whether Stumpf has responded to Oates’ e-mail.
If he hasn’t responded, he should get on that.