Pandemic profits soar by billions for big companies as poorest pay price

Pandemic profits soar by billions for big companies as poorest pay price

Now is the time to build an economy that puts people first, protects the most vulnerable and shares profits equitably

Thirty-two of the world’s largest companies stand to see their profits jump by US$109 billion more in 2020 as the COVID-19 pandemic further exposes an unequal economic model that delivers profits for the wealthiest at the expense of the poorest, according to a new Oxfam report today.  

Power, Profits and the Pandemic, published ahead of tomorrow’s six-month anniversary of the declaration of the pandemic, outlines how COVID-19 has made things even worse by encouraging corporations around the globe to put profits before their workers, focusing on short-term returns and maximising efficiencies all while limiting worker and stakeholder power and using their political influence to shape policy responses. Corporations have exacerbated the economic impacts of the pandemic by funnelling profits to shareholders instead of investing in better jobs, paying their fair share of taxes and prioritising their workers.   

Globally, half a billion more people are expected to be pushed into poverty by the economic fallout from the pandemic – and by the end of the year more people could die from hunger linked to COVID-19 than from the disease itself. 400 million jobs have already been lost and the International Labour Organisation estimates that more than 430 million small enterprises are at risk – while the 25 wealthiest billionaires increased their wealth by a staggering US$255 billion between mid-March and late-May alone. 

Jim Clarken, Chief Executive of Oxfam Ireland, said: “We are at a critical juncture. We have a choice between returning to ‘business as usual’ or learning from this moment and transforming a global economic system that doesn’t work for all, especially those most vulnerable.   

“While workers, their families, and businesses the world over are struggling to survive, some large corporations have either managed to shield themselves from the economic fallout of the pandemic, or even cashed in on the disaster. The excessive profits of these companies would not be a problem if they were widely shared and benefited the rest of society. Instead, we’re seeing low-wage and informal workers across the world struggling to cope with the impact of COVID-19, saying the virus will starve them before it makes them sick. 

“The pandemic must be the catalyst for reining in corporate power, restructuring business models with purpose and creating an economy for all. Our report proposes a blueprint. It all starts and ends with an economic model that puts people at the centre, protects the most vulnerable, shares profits equitably and is grounded in democracy.” 

Oxfam finds that many companies’ ability to cope with the economic damage wreaked by the pandemic and take care of their employees has been severely undermined by years of increased payments to shareholders; some companies having handed over amounts significantly greater than their profits.  

From 2016 to 2019, 59 of the world’s most profitable companies distributed almost $2 trillion to their shareholders, with pay-outs averaging 83 percent of earnings.   

Oxfam is calling for a global response to the crisis that prioritises support for workers and small businesses. It includes establishing a COVID-19 Pandemic Profits Tax to ensure shared sacrifice, and the redeployment of resources away from those cashing in on the pandemic and toward those bearing the burden. One concrete policy that the Irish Government could implement is to require that companies adopt a human rights due diligence approach and identify, prevent, mitigate and account for human rights risks associated with business models in operations and supply chains. The EU is currently considering legislation in this area. 

Long term, Oxfam is asking policymakers and corporations worldwide to re-balance corporate purpose, profits and power away from exclusively benefiting executives and shareholders towards workers, suppliers, consumers and communities. A corporate reform agenda should ensure every worker is paid a living wage, has a safe place to work and a voice in the workplace before a single dividend is paid to shareholders. Corporations must pay their fair share of tax and policy makers must rein in corporate power to stop them from rigging the rules. 

ENDS

CONTACT  

Caroline Reid | caroline.reid@oxfam.org | +353 (0) 87 912 3165

Alice Dawson-Lyons | alice.dawsonlyons@oxfam.org | +353 (0) 83 198 1869

Notes to editor

Power, Profits and the Pandemic is available here.

The report sets out examples including:   

  • In the US, an estimated 27,000 meat packing workers have tested positive – one in nine employees - and more than 90 have died from COVID-19. The country’s largest meat processing company, Tyson Foods, published a letter advocating against closing its factories, despite 8,500 of its employees testing positive for the virus. 
  • Ten of the world’s largest apparel brands paid 74 percent of their profits (a total of $21 billion) to their shareholders in dividends and stock buybacks in 2019. This year 2.2 million workers in Bangladesh alone were affected when textile orders were cancelled. Factory shutdowns have lowered revenues in the country by an estimated $3 billion. 
  • In India, hundreds of tea plantation workers, many of them women, have gone unpaid as a result of the COVID-19 lockdown. At the same time, some of the largest Indian tea companies have boosted their profits or have been able to maintain profit margins by cutting costs.   
  • Mining operations in Peru have been kept open despite high risks of infection among their employees.  
  • Chevron announced cuts of 10-15 percent of its 45,000 global work force despite spending more cash on dividends and share buybacks during the first quarter of the year than they generated from core business.  
  • Nigeria's largest cement company, Dangote Cement, allegedly fired more than 3,000 staff without prior notice or due process while the company is still expected to pay 136 percent of its profits to shareholders in 2020.  
  • Jeff Bezos is the founder and owner of Amazon. Amazon’s market capitalisation is over $1.5 trillion[1] and Jeff Bezos is now the richest man on earth worth around $200 billion[2].  His wealth has increased with $92 billion in only five months, between 18 March and 20 August 2020. Bezos could have paid each of Amazon’s 876,000 employees a $105,000 bonus and would still be as wealthy as he was at the onset of the pandemic.[3] Invested over 25 years at 6 percent interest rate this bonus would increase to $450,000 in retirement savings for each employee.  

Solutions: 

  • RESPOND: TAX COVID-19 SUPER PROFITS FOR THE GREATER GOOD: With millions out of work and governments’ struggling to effectively respond to the pandemic, companies earning exorbitant profits for the already wealthy and well-connected will no longer suffice. These outsized gains should be taxed to level the playing field between companies and raise much needed funding for COVID-19 relief and recovery. 
  • REFORM: PURPOSE, PEOPLE, PROFITS AND POWER: This is the time for governments to create incentives and limitations to radically rein in corporate power and create an economy for everyone that will withstand a transition into a world permanently altered by climate change. We need an economic model that puts people at the centre, protects the most vulnerable, shares profits equitably, and is grounded in democracy. Both governments and the private sector have a role to play in this reform. Purpose: redefining the ‘why’ of business; People: putting people at the centre of business; Profits: ensuring a fair share for all stakeholders; Power: transforming how corporations are governed. 
  • REBUILD: PROMOTING VIABLE ALTERNATIVES: A fundamental change in business models is not utopian. Viable alternatives exist and continue to gain traction. Social enterprises, cooperatives, mission-led businesses and fair trade enterprises are just a few examples of the diverse range of organisations that prioritise the interests of workers, farmers, communities and the environment over returns to investors.  

 

 

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