The recent stock market volatility underlines that we are watching what may be one of the most consequential macro-economic experiments of our time: What will U.S. companies do with the dollars they gain from tax reform? Pay more to employees? Buy new equipment? Give it all back to shareholders?div > div.group > p:first-child">
I believe in capitalism. Cutting the corporate tax rate to 21 percent from 35 percent certainly could charge up the economy and markets – and float wages higher. But there"s also the potential for it to heat up inflation and worsen income inequality. It all comes down to what business leaders decide to do with this extra cash in 2018.
It"s not an overstatement to say it will have an effect on our very perception of capitalism as an ultimately benevolent or purely self-interested force in America, particularly in the eyes of our younger workforce participants, who are more idealistic than their predecessors.
Think of it: Millennials have much kinder views toward socialism than any generation before. What happens next in our economy will be a formative experience for them and the generation that comes next. This is, increasingly, your company"s workforce. And believe me, they are watching.
As an executive at Thinx, a for-profit, yet mission-driven company, I am inspired by my fellow CEOs, board members and investors who are looking at this as a legacy moment.
And, no, I don"t mean "legacy" as in ever-larger trust funds for grandchildren. Nothing against trust funds – or grandchildren! – But imagine how this money could be used to make the world a better place for the less privileged among us. How do we invest in all of America?
Some large U.S. companies such as Apple, Walmart and Starbucks have been making a splash announcing plans to give back millions to their employees, using the windfall to hand out employee bonuses, increase wages and increase contributions to retirement plans. They are giving us cause for celebration.
Others have announced larger share buybacks, which will enrich investors and company management.
Yes, yes, I know. Anyone with a 401(k) — many of them middle-class, lifelong workers — will benefit from share buybacks. But younger and poorer workers often have little to gain from share price increases. They haven"t been able to save enough to invest. Buybacks leave them behind.
So how do we more directly help disadvantaged communities? By aligning ourselves with nonprofit organizations that reach them where they live. Nothing says this has to be divorced from self-interest. The right partnerships with the right charities can elevate your brand.
It"s the right thing to do. But it also makes smart business sense.
In today"s e-commerce world, there are always cheaper, more accessible product alternatives, no matter what you"re shopping for. But more consumers, particularly Millennials, want to be associated with and support brands that make a difference in their societies. They want to feel connected. They are more altruistic.
This has created a new kind of company. I"d say it"s even a new kind of capitalism. Think of TOMS, the shoe company that started the giveback movement a decade ago with its "buy-one, give-one" approach. It"s good branding and good business – and it retains workers.
Startups might be in the best position to try to innovate our traditional capitalist model. But many fall outside of much of the business benefits of tax reform. They tend to cluster on the coasts, where higher property taxes can no longer be written off to the degree they were before. And they often operate in growth mode, reinvesting all profits, so they will not get the big tax break.
And venture investors want them to stay intensely focused on getting to profitability.
I think this is short-sighted. The benefits of the tech economy have largely accrued to a privileged few. Many venture investors recognize this as well: It"s time for startups to not only focus on becoming successful, on generating revenues, but also in making sure that their businesses are doing the right thing by society.
Businesses large and small alike need to recognize the divisive nature of the modern economy. There are winners and losers among us, and the gap between the skilled, high-paid tech economy and the rest of America is widening by the day. It"s becoming clear that we are not going to solve this problem overnight via the usual levers of capitalism, so the time is now to think about how to be good stewards of the prosperity we generate.
American business culture is, above all else, creative. Imagine if we applied that creativity to how to elevate all of us?
Maria Molland Selby is the CEO of Thinx, which makes period and pee-proof underwear to empower people through product innovation and social change.
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