Sharing the Wealth: Bonuses for Low-Income Workers

A California company is taking the unusual step of giving its low-income workers a share in its annual profits. This year, each non-management worker at Timbuk2, a firm backed by Pacific Community Ventures, received bonuses averaging $25,000. Zoe Corneli of member station KALW reports.

Copyright © 2006 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

MADELEINE BRAND, host:

We've all heard of Silicon Valley stock option millionaires, those workers who get rich by sharing in a company's profits. But low-income workers aren't usually invited to profit share and when they are it's often just a small supplement to their regular income. One California company is breaking that pattern. From member station KALW in San Francisco Zoe Corneli reports.

(Soundbite of people cheering and clapping)

ZOE CORNELI reporting:

That's the sound of 40 primarily factory and warehouse workers receiving bonus checks for up to twice their annual salary. The average payout was about $25,000.

Ms. MACY ALLATT (Timbuk2, Marketing Manager): The day we all found out it was just like Christmas.

CORNELI: Macy Allatt is Timbuk2's marketing manager.

Ms. ALLATT: I know, it was like, oh, my god, that's amazing and we're so excited.

CORNELI: Today marks a success for Timbuk2. Three years ago the company was struggling. It had been making one product since 1989, a custom bike messenger bag. Enter Mark Dwight, a corporate executive born and bred in California's Silicon Valley. He worked with investment capital firm Pacific Community Ventures, or PCV, to set up a plan for the company's growth. But, Dwight says it wasn't just any old business plan.

Mr. MARK DWIGHT (CEO, Timbuk2): Pacific Community Ventures is a socially responsible venture capital fund, meaning that they invest in companies that, in their particular case, create jobs in economic development zones.

CORNELI: PCV targets businesses with high growth potential in low-income communities in California. President and co-founder Penelope Douglas calls that strategy the double bottom line.

Ms. PENELOPE DOUGLAS (Pacific Community Ventures): Our investors in our investment funds absolutely expect market returns on their investments and we fully expect we can provide those. By the same token, our investors also have an eye on a social impact or a community impact.

CORNELI: At Timbuk2 that meant setting up an employee wealth sharing program that would give workers a share of any significant cash profits. CEO Mark Dwight says the next step was to grow the business.

Mr. DWIGHT: Over the past three years we have added about 30 new products ranging from computer bags to accessory products and now we're introducing a line of day packs.

CORNELI: This expansion helped Timbuk2 more than double its sales and the company was then ready to sell to new investors who could provide the capital it needed to keep growing. A group of private investors bought the majority ownership of the company from PCV. This refinancing generated a multimillion dollar profit and Timbuk2 gave 5 percent of it, $1.1 million, to the workers. The company also provided financial counseling on how to manage this windfall. Bea Shay Eu(ph) has been a sewer here for four years.

Ms. BEA SHAY EU (Sewer, Timbuk2): (Through Translator) The majority of us will put the money in our 401(k)s to use for retirement. I have one child. I will definitely send her to college.

CORNELI: Steven Tadelis is an associate professor at UC Berkeley's Business School and co-author of a study on profit sharing. He says a program of this size for low-income, unskilled workers is highly unusual.

Mr. STEPHEN TADELIS (University of California Berkeley): Primarily profit sharing occurs in professional services--law firms, accounting firms, medical practices, advertising, those kind of industries--where you have very highly educated, typically complicated and rather complex services that are being provided.

CORNELI: But for low-income workers, he says profit sharing can improve morale, which might boost productivity. And, he says, there's room in the market for socially responsible investors. Timbuk2's Mark Dwight says if his company continues to grow according to plan, it'll refinance again in three to five years, which means these workers can look forward to another bonus. For NPR News, I'm Zoe Corneli in San Francisco.

(Soundbite of music)

BRAND: DAY TO DAY is a production of NPR News with contributions from Slate.com. I'm Madeleine Brand.

Copyright © 2006 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.