10 SEP 2020
Pandemic profits soar by billions as poorest pay price – Oxfam
Some corporations are cashing in while failing to protect jobs and health
Thirty-two of the world’s largest companies stand to see their profits jump by US$109 billion more in 2020, according to a new Oxfam report today which highlights that Covid-19 has exacerbated existing inequality with the most vulnerable losing out.
Power, Profits and the Pandemic outlines how many corporations around the globe – including those bailed out by governments – have put profits and pay outs to shareholders before jobs and workers’ safety and have pushed costs and risks associated with COVID-19 down their supply chains. The pandemic was declared almost six months ago on March 11.
Globally, half a billion people are expected to be pushed into poverty by the economic fallout from the pandemic. Four hundred million jobs have already been lost and the International Labour Organisation estimates that more than 430 million small enterprises are at risk.
Meanwhile, pay outs to shareholders have been protected fuelling a share price boom which has in turn massively increased the wealth of the richest. The figures are staggering:
- The 25 most profitable global corporations in the S&P Global 100 Index are expected to pay shareholders over US$378 billion in 2020 – equivalent to 124% of their profits.
- The top 100 stock market winners have added more than US$3 trillion to their market value since the pandemic.
- Jeff Bezos could personally pay each of Amazon’s 876,000 employees a one-time US$105,000 bonus today and still be as wealthy as he was at the beginning of the pandemic.
An excess profits tax on the 32 most profitable companies could raise an estimated US$104 billion to address COVID-19. This would be enough to pay for COVID-19 testing and vaccines for everyone on the planet with US$33 billion left over.
Oxfam International Executive Director Chema Vera said: 'COVID-19 has been tragic for the many but good for a privileged few. The economic crisis we are suffering because of the pandemic has been fuelled by a rigged economic model. The world’s largest corporations are making billions at the expense of low wage workers and funnelling profits to shareholders and billionaires.
'It is sickening that, in the middle of a pandemic, some corporations are paying-out massive dividends to wealthy shareholders having received government bailouts meant to protect jobs. Scarce resources are being handed to the already super wealthy at a time when hundreds of millions of people are suffering the consequences of this pandemic. Women, racial and ethnic minorities or migrants are being significantly impacted.'
The report sets out numerous examples where companies have put lives and livelihoods at risk in pursuit of profit:
- 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% of their profits (a total of US$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 US$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% 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% of its profits to shareholders in 2020.
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. It warned that government’s ability to respond to COVID-19 had been undermined by tax dodging.
From 2016 to 2019, 59 of the world’s most profitable companies in the US, Europe, South Korea, Australia, India, Brazil, Nigeria and South Africa distributed almost US$2 trillion to their shareholders, with pay-outs averaging 83% of earnings. The three largest healthcare companies in South Africa – Netcare, Mediclinic and Life Healthcare Group – paid out a staggering 163% of their profits to shareholders through dividends and share buy-backs.
Oxfam is calling for a response to the immediate 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.
Long term, Oxfam is asking policymakers and corporations to 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 policymakers need to rein in corporate power to stop them from rigging the rules.
Vera said: 'We are at a critical juncture. We have a choice between returning to "business as usual" or learning from this moment to design a fairer and more sustainable economy.
'Some of the captains of capitalism have jumped on the bandwagon and promised to move away from a shareholder first model. This talk is cheap. The pandemic must be the catalyst for reining in corporate power, restructuring business models with purpose and rewarding all those that work with profits, creating an economy for all.
'Unless we change course, economic inequality will increase. Now is the time to shore up small businesses, workers and democratic institutions – not an even smaller number of large corporations that are exerting greater economic and political power.'
- End -
Notes to Editors
- Download 'Power, Profits and the Pandemic'
- The 32 companies expected to make additional profits of US$109 billion in 2020 are listed in the table below. The table lists annual average profits and dividend pay-outs for the period 2016-2019, and 2020.
- Jeff Bezos is the founder and owner of Amazon. Amazon’s market capitalisation is over US$1.5 trillion and Jeff Bezos is now the richest man on earth worth around US$200 billion. His wealth has increased with US$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 US$105,000 bonus and would still be as wealthy as he was at the onset of the pandemic. Invested over 25 years at 6% interest rate, this bonus would increase to US$450,000 in retirement savings for each employee.
- Estimates for the revenue raised by an excess profits tax are based on a proposal by Prof Avi Yonah of Michigan Law School, which would tax profits above a company’s previous four-year average at 95 per cent, with the total corporate tax and excess profit tax liability of the company capped at 80 per cent. The tax would only apply to companies with annual receipts above US$500 million. Tax credits would be given for research and development and could be given for other socially useful activities. Overall, the 32 companies are expected to make US$413 billion in after-tax profits this financial year.
P.R. La Monica. (2020, July 10). Amazon, Apple and Microsoft race to US$2 trillion. CNN. https://www.cnn.com/2020/07/10/investing/amazon-apple-microsoft-market-value/index.html
Forbes. (2020, August 26). Jeff Bezos Becomes The First Person Ever Worth US$200 Billion. https://www.forbes.com/sites/jonathanponciano/2020/08/26/worlds-richest-billionaire-jeff-bezos-first-200-billion/#64e574b44db7
https://www.forbes.com/profile/jeff-bezos/#7cb1a86a1b23; https://www.businessinsider.com/jeff-bezos-net-worth-life-spending-2018-8; https://www.geekwire.com/2020/amazon-tops-935k-employees-week-pandemic-driven-hiring-spree-continues
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