Millionaire seeks policy changes to close income gap in America

By Patt Morrison

Los Angeles Times

In 2010, not long after the tea party was making its presence felt, a group with a different makeup and mission was created: the Patriotic Millionaires. Its membership requirements are an annual income over $1 million and/or assets of $5 million, and it wants policy changes that will open more opportunities for the little guy. Patriotic Millionaires like George Zimmer thinks America’s income gap is dangerous for democracy. In 1973, Zimmer founded Men’s Wearhouse, the “you’re going to like the way you look” clothing chain. After he was dumped by the board as executive chairman in 2013, he launched an Oakland, Calif.-based app-driven business that provides on-demand clothing alterations, one that he says practices the “servant leadership” and employee empowerment he’s been preaching all along.

Q: Patriotic Millionaires wants to raise the minimum wage and raise corporate taxes. Do you agree?

A: I’m in favor of raising the minimum wage. The president’s proposal was $10.10. In Los Angeles, they (approved) $15 an hour over a number of years. The maximum corporate tax rate today is 35 percent. I would lower the corporate top rates to 25 percent from 35 percent but insist that companies like Apple and many others actually pay American taxes. So many corporations have figured out ways not to pay their taxes. If we lowered it, fewer companies would try to evade their taxes. (But) I’m not sure that’s politically possible.

(Patriotic Millionaires) is a small group with a big name, people who had success from capitalism who think capitalism is in need of a modification to reduce the income inequality, to make it more fair. It’s not pure(ly about) income inequality; it’s the inequality of opportunity.

Q: What’s gotten us to the point where chief executives earn hundreds of times more than workers?

A: I go back to the election of Ronald Reagan as the tipping point. It wasn’t a light switch, of course; it’s a continuum.

In the 1950s and ’60s, prominent CEOs lived in the same neighborhoods as successful physicians and attorneys and other professionals. The idea that Thomas Watson, the CEO of IBM, would pay himself a million-dollar salary was preposterous; he was a man of culture and education and knew that was inappropriate. His power was at some level its own compensation.

That changed around 1980, and we have a reliance on the market economy as though it were being given to us on the mountaintop, like Moses. In fact, only in the last 50 years has maximizing shareholder value been part of the conversation on capitalism. The original idea was that companies would identify social reasons for their existence, other than their own profits. Adam Smith, who wrote “The Wealth of Nations,” wrote a book called “The Theory of Moral Sentiments,” about the moral underpinnings that this new capitalistic system would require in order to work for everybody.

(But) beginning in 1980, we started to get things like hedge funds. We are rewarding shareholders and not worrying about stakeholders. (We should) initiate dialogue about moving from a strictly shareholder model to a stakeholder model so customers, employees, communities and suppliers have a seat at the table as well as the chairman.

Q: Men’s Wearhouse was private, then public. What was your compensation as its founder and CEO?

A: My successor’s compensation package in the current year is approximately equal to my entire compensation over 40 years: about $9.6 million. I paid myself plus or minus a half-million for about 20 years. After the company went public in 1992, I became a millionaire; I set up a foundation whose primary purpose was providing college scholarships to children of Men’s Wearhouse employees. I took my salary over a similar time and donated to the scholarships.

Q: How well did you pay your employees?

A: We were certainly (near) the top. We did pay some employees minimum wage, but we had a very generous group medical policy and one of the early employee stock ownership plans, back in the 1980s. We were voted one of the best companies to work for (at least 12 times in Fortune magazine’s annual list).

Now I’m not paying anybody in downtown Oakland less than $15 an hour. It’s as much a personal choice – because I think it’s the right thing – as it is a political agenda.

Q: What’s happening to the middle class?

A: I read Thomas Piketty’s book, “Capital in the Twenty-First Century.” It does present interesting research that suggests that without tax changes during the balance of this century, we will have a system where the top 1 percent of society owns 99 percent of everything. I’m not saying I believe in socialism, where everybody should have the same. I’m very proud of the American system. I’m saying there’s got to be a middle point. We think of America as the land of opportunity, that you can rise above the class of your family. When I was a boy, that was relatively true. But today it’s more difficult to change socioeconomic quintiles in America than in a dozen other industrialized Western countries. We should all be concerned about a declining middle class.

Q: You crafted a proposal you call a new deal for the middle class. What’s become of that?

A: I sent that out to a dozen politicians and nobody even got back to me. That’s the way it works in politics. Living the way I did – giving away my income and not giving myself (stock) options – coupled with Citizens United, has diminished my political voice. Nobody is interested in ideas. They want money. I was a more significant donor 10 or 20 years ago.

Patt Morrison is a columnist for the Los Angeles Times. Readers may send her email at patt.morrisonlatimes.com. Distributed by Tribune Content Agency, LLC.