VOL. 133 | NO. 6 | Monday, January 8, 2018
Companies Boost Wages and More Post-Tax Reform
By Andy Meek
Dozens of companies, many with ties to Memphis, have pledged a series of actions that include one-time employee bonuses, charitable spending and 401(k) contribution increases, among other steps, in response to savings they expect to see from recently enacted Republican tax cuts.
Regions Financial Corp., one of the top financial institutions in the metro Memphis banking market as ranked by deposit share, is one of the latest additions to that list of companies, which also includes First Horizon National Corp., FedEx Corp. and SunTrust Banks Inc. Pointing in recent days to savings its expects to see from the federal tax reform legislation, Regions has pledged an increase in its minimum wage to $15 by the end of 2018 – a step that benefits about 25 percent of its workforce.
Other steps include contributing $40 million to the company’s charitable foundation to support initiatives like financial education, job training, economic development and affordable housing. Regions also plans to boost capital spending by about $100 million over 2017 to invest in facilities, technology, product innovations and service.
United States President Donald J. Trump speaks on the South Lawn of the White House surrounded by United States Vice President Mike Pence and Republican members of Congress after the United States Congress passed the Republican sponsored tax reform bill, the 'Tax Cuts and Jobs Act' in Washington, D.C. on December 20th, 2017. (Alex Edelman/AP Images)
Regions decided to pledge those actions, according to chairman and CEO Grayson Hall, because “we understand that the growth of our company is based on the economic vitality of the communities where we do business.”
It’s a similar conclusion that companies from across the corporate spectrum have likewise reached.
SunTrust Banks has pledged to commit $50 million in additional community grants to national and local financial well-being efforts. Like Regions, SunTrust is also enacting a minimum wage increase to $15 an hour, as well as merit-based pay increases for about 20 percent of its workforce; a 1 percent 401(k) contribution to retirement savings for all workers, in addition to the company’s 6 percent match opportunity; and a $1,000 financial incentive for all workers who complete SunTrust’s Momentum onUp financial fitness program.
FedEx executives told analysts during an earnings call in December that the Memphis-based package delivery company would hire more workers and raise its capital spending upon passage of the tax reform legislation.
And First Tennessee Bank’s parent company said it will pay $1,000 bonuses to workers this month, with CEO Bryan Jordan citing the company’s performance and the “recent tax reform efforts that we believe will benefit First Horizon.”
These companies join others like Southwest Airlines and TV broadcaster Sinclair, both of which likewise pledged one-time $1,000 employee bonuses.
According to John Phillips, chief investment officer for Red Door Wealth Management in Memphis, steps like these are what to expect out of the tax reform legislation.
The legislation, he told The Daily News, largely represented a corporate tax cut – which is permanent – and not necessarily a big individual tax cut, with those expiring after 2025.
“It will be interesting to see what corporations do with the potential savings, whether it's increase wages, invest in new projects, buy back stock or retire debt,” he said.
David Waddell, president, CEO and chief investment strategist with Waddell & Associates, said he thinks the legislation will boost public company earnings 5 percent to 10 percent based on current fundamentals.
“The stock market is quickly repricing to acknowledge this,” Waddell said. “With labor markets tight, corporations will spend aggressively on capital stock, meaning more productivity within the economy.
“In addition to additional investments, nearly 100 companies have already boosted wages, citing tax reform as the catalyst ... Like it or not, tax reform will work to boost wealth and wages across the U.S. economy. In sum, estimates for everything right now may be too low.”