Shareholders Gain from Employer-sponsored Earned Wage Access
With the rise of stakeholder capitalism, it is important to understand the difference between a stakeholder and a shareholder. According to Corporate Finance Institute: “A shareholder is a stakeholder of the company, while a stakeholder is not necessarily a shareholder.”
A shareholder is a person who owns an equity stock in the company, and therefore, holds an ownership stake in the company. On the other hand, a stakeholder is an interested party in the company’s performance for reasons other than capital appreciation. Stakeholders care that the company “does good” – meaning that they take actions that benefit anyone who has an interest in the enterprise – those constituents, as identified in the Business Roundtable’s new purpose of the corporation, that include employees, customers, vendors/suppliers, the community, and shareholders. Research shows that companies that do good do well.
A shareholder’s primary focus is on profitability, a portion of which is typically distributed to shareholders in the form of dividends, and return on investment which is a measure of the appreciation of the shareholders initial investment in the enterprise, typically reflected in market value. Shareholders are concerned with the organization’s ability to achieve their financial strategic goals.
Shareholders care about the economics of the business – focused on cost/benefit decisions made by the company related to processes and program initiatives. Shareholders love programs that cost nothing and generate sustainable profitability. Shareholders also care about the obvious link between a more productive and stable workforce. In an increasingly employee-dependent business environment, this becomes an important aspect of business operations. Employees that were once thought of as a commodity (available when needed) are now seen as a competitive advantage (critical to business success).
In a service-heavy economy, such as the US, employees and the productivity they generate are a key element that organizations need to manage to generate economic value for shareholders. For the average organization, low and moderate income (LMIs) comprise most of their employee population – as 58%+ of all US workers are LMIs. Shareholders’ attention to “worker” matters have increased in the last several years – starting with the composition of board directors all the way to non-profit foundations that address employee and community needs.
To enhance employee impact, organizations need to address the basic needs of their employees – especially the LMIs. Employer-sponsored Earned Wage Access (EWA) is one benefit that organizations can offer that requires no investment ($0 cost) and generates enormous benefit. These benefits include:
|Retention||Longer-tenured employees are better performers. The benefit is more experienced employees generate more revenues, lower expenses, and in general are more productive||EWA eliminates the need for employees to find employers that provide them access to their wages when they need them.|
|Attrition||Lower turnover (attrition), especially first-year attrition saves organizations money as they are not recruiting new employees.||EWA is associated with less attrition and absenteeism in the organization. Allowing workers to access their wages when they need them eliminates the need for “day jobs” to have cash in between pay checks.|
|Engagement||A more engaged workforce is associated with organizations with higher levels of productivity. Higher levels of productivity generate more efficient organizations, therefore more profitable organizations||EWA signals to workers that their organization’s care about them.|
|Sustainability||Less turnover, longer tenured, and engaged employees enhance organizational efficiencies which lead to higher levels of profitability.||EWA provides an incentive for employees to stay with their companies, focus on their work, and do their jobs better because they aren’t distracted by financial distractions.|
Employer-sponsored EWA benefits shareholders as it is a no-cost benefit offered to employees that generate measurable improvements in retention, engagement, and productivity. This benefits the company by generating more profits and market value through enhancing revenues, generating innovation, and reducing the expense associated with an unstable workforce.