How Profit and Purpose Work Together.....

What's the right way to determine workers' pay?

For years, business orthodoxy has been to let the market decide. Companies pay the lowest wage that enables them to get the people they need.....

But PayPal CEO Dan Schulman, who is this week's guest on Fortune's Leadership Next podcast, had a different idea. Traditional capitalism, he says, "needs an upgrade. This idea of just counting on market forces to create a just and equitable society isn’t working."


So instead, Schulman commissioned a study of PayPal's pay practices. And what he found is that those working at the company's call centers and in other entry level jobs - which he says was a substantial portion of the company's workforce - were being paid at levels that left them only 10% of their pay, after subtracting taxes and essential living expenses.

"We feel like 20% is the bare minimum you need to have savings, to not struggle, and to make ends meet at the end of the month," he said. So he gave all those workers a substantial pay increase, even though market conditions did not require it. "You can’t have passionate employees if every month they are worried about how they are going to make ends meet.”

Schulman is a leading example of the new stakeholder approach to business leadership - which is why we invited him on the podcast. And in his case, shareholders are just fine with his approach - the stock price has increased 75% since the first of the year.

“The people who argue profit and purpose are two different things, I think, don’t understand that they don’t really work against each other,” he says.

 

 By Alan Murray