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Thursday, October 25, 2012

Staples and the 2012 Presidential Election

Mitt Romney claims that he is the superior choice for President because he has been a job creator thanks to his time in the private sector. Specifically, as the Wall Street Journal reported in July, Romney claims that he created "more than 100,000" jobs while running Bain Capital.

However, this figure seems to be overstated, as the WSJ noted:
Steven N. Kaplan, a finance professor at the University of Chicago who studies private equity, used another approach: counting 100% of the jobs gained and lost at Bain companies, but only until Mr. Romney left the firm in 1999. By that measure, Mr. Kaplan concluded that Mr. Romney had created "tens of thousands" of jobs....

"I don't think that an investor should get credit for the jobs created beyond the ones where an investor has a position in the company," said John M. Abowd, a labor economist at Cornell University who donated to the Obama 2012 campaign.
He suggests yet another way: Give Mr. Romney and Bain credit for a share of jobs created proportional to Bain's ownership stake in its investments at the time. Because Bain held minority stakes in all four firms, and sold out years ago, that method would produce a far lower total—less than 1,500.

By whatever counting method, it is clear that Staples figures prominently in Romney's jobs record. The Republican presidential candidate refers to Staples fairly frequently and the WSJ piece specifically evaluated Romney's contributions to the office supply company's success:

Mr. Romney includes in his tally the total Staples head count today, about 88,000 jobs. Securities filings show Bain owned 7.3% of the office-supply retailer when it went public in 1989 and had sold out by early 1992, when Staples had 5,300 employees.

Thomas Stemberg, Staples's founder and former CEO, said Mr. Romney's contribution to Staples came "from his personal advice, input and efforts, not his money." Mr. Stemberg, a major backer of the Romney campaign, said he would give Mr. Romney credit for 100% of Staples's 88,000 jobs.

By Mr. Kaplan's method, Mr. Romney should be credited with the 43,000 jobs Staples had when Mr. Romney left Bain in 1999. The weighted average count would be more like 250 jobs—a total Mr. Stemberg called "absurd."
Regarding Staples, the Journal does not address an issue that Mother Jones raised this past July:
Mitt Romney, who served on Staples' board of directors in addition to investing in the company when he was at Bain Capitol, likes to tout the chain as an example of private-sector success. But as the National Employment Law Project Action Fund points out in a new report, that success has not trickled down to employees.

The report lists Staples as one of the 50 largest low-wage employers in the US. The company has continued to turn high profits even in the recession, and its CEO made $8.8 million in 2011 (which was a 40 percent drop from what he made in 2010). And yet most of its nearly 33,000 employees make less than $10 per hour
The Mother Jones piece contrasts Staples to Costco, where employees earn $19 per hour, on average. Many (if not most) employees also receive health care benefits.

Readers might be interested to learn that the Costco CEO, Jim Sinegal, spoke at the Democratic National Convention:
“And that’s why I’m here, supporting President Obama, a president making an economy built to last,” Sinegal said in his prepared remarks. “See, in order for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us.” And later: “here’s the thing about the Costco story: We did not build our company in a vacuum.”
The Washington Post story includes Sinegal's entire address, if you are interested. Incidentally, the Staples CEO, Stemberg, spoke at the RNC and often touts Romney in various media outlets.

I offer one note in closing for local readers: The cost-conscious University of Louisville Purchasing policy includes this opening paragraph in the section on office supplies:

"Office Supplies are to be purchased through the University's primary contractor, Staples Advantage. The cooperative effort between Staples and the Department of Purchasing continues to keep our University at the leading technological edge of procurement and together we are able to offer unprecedented discounts based on volume purchasing contracts. "


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