So it's a little strange to see him sitting pensively or to hear him expressing doubt.
But that's what he's doing.
I ask what's on his mind.
"The Social Contract," he answers. He says it the way some people would say, "My visa bill."
"I've just become really unsettled with the hardball way senior management (in Corporate America) wants to play with the masses.
"I think we're missing a bet. We shouldn't eat our children to avoid starvation. We have too few businesses focused on what's good for the country, too many focused on their very short term business interest," he says.
"What's the Social Contract," I ask?
"It's basically a covenant between the worker and the business. It determines the quid pro quo. The worker gives his labor--- and (the contract says) what he gets in return. The rub is that some people think the business owes the worker a fair days' pay for a fair days' work--- that you don't owe him the gift of a pension because you've already paid for the work.
"The question is whether retirement in dignity is part of the Social Contract. I've never thought that a pension was a gift. The phrase "wages, hours, and other conditions of employment" includes a pension. What you were required to do was structure compensation so it included 'retirement in dignity.'
"What has bothered me is that our business schools have taught slash and burn--- if you can cut payrolls to make a profit, you get an "A."
"Remember, things have changed. A century ago you might do forty years of work and four years of retirement, all within 50 miles of all your relatives. There was family support. Today, you work forty years in different cities. You go where the job is, you're 1,000 miles from any of your relatives, and retirement lasts a lot longer. If we lose the purchasing power of retirees we're not talking about losing a small amount.
"So, I'm worried. We're in trouble. What will happen when 20, 30, or 40 million workers retire to despair and run out of money in their 70's?
"It means you become the executor of your own estate--- you get to sell everything and have the nightmare experience of selling everything you treasure because you want to eat. That's the fate I see in store for tens of millions of American households.
"But the solution is in plain sight. It's to understand that capitalism is the strongest mechanism ever built by man and if we can sell a Starbucks coffee for $3.50, we can also sell it for $3.55. Yet the entire concept of employee benefits seems up for grabs.
"We shouldn't be talking about making the profit plan by cannibalizing benefits. You have to make your profit plan while honoring your obligation to employees. If you make your profit plan by cannibalizing benefits, you're not a very good businessman."
Can American companies really provide " retirement in dignity" just by adding a nickel to the price of a cup of fancy coffee, I asked?
He responded by telling me two stories, one international and one domestic.
On a trip to Tokyo he and his wife had noticed fifteen or twenty "Elevator Ushers." The ushers asked each guest what floor they wished to go to, stepped inside the elevator to push the button, and thanked them for being a guest. Impressive--- but Hamilton thought it was a wasteful "make work" practice. They saw the same thing at the major department stores.
Finally he asked a Japanese businessman, why were they so wasteful with labor?
"Our culture believes that honorable employment costs far less than your American welfare system. Because all work in Japan, we have no unemployment, no welfare," the businessman answered.
Confronted with a major business problem, Henry Ford came up with a solution that changed America. Paying $2.25 a day, Ford suffered high turnover and a multitude of work injuries. In 1916, Hamilton noted, the Ford Highland Park plant recorded nearly 200 severed fingers and more than 75,000 cuts, burns, and puncture wounds.
So Henry Ford doubled wages, creating the $5 a day job. In one stroke he reduced turnover, built skill levels, cut accidents and injuries, increased morale, and created thousands of buyers for his cars.
In 21st Century America, we just cut jobs, benefits, or both.
But can you really offer retirement in dignity for just a nickel on a fancy cup of coffee, I asked again.
To prove his point, Hamilton showed me a spreadsheet. It showed a company whose sales were 5 times payroll that had only 40 percent of its employees contributing only 3 percent of pay to their 401(k) plan and the company match was 50 percent of the first 6 percent of payroll--- not enough for "retirement in dignity."
"How much", Hamilton asked, "do you think it will cost to offer a good retirement plan, one where 90 percent of employees participate, contribute 8 percent of pay, and get a company match that's 100 percent of the first 6 percent of payroll?
I told him I didn't know.
He showed me. Although the cost of the employer match increased 9 times it was still a small amount as a percent of sales--- less than 1 percent.
"That would add 3 cents to the $3.50 price of a Grande Latte--- or a Happy Meal. Three cents!"
Maybe Executive America needs to do something more imaginative than cost cutting.
The first Starbucks Solution: URL
ON THE WEB: You can read more about Brooks Hamilton by visiting my website (www.scottburns.com) and putting his name in the search engine.
Earlier Columns on Brooks Hamilton and Defined Contribution Plans
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