Conscious Capitalism vs. Unions? A Look at Whole Foods

Published October 1st, 2013 -  - 10.01.131


The idea that labor unions and their attendant collective bargaining privileges are necessary to workers’ welfare is all but assumed in many corners of the American labor movement. Several companies, however, are reviving a model whereby an employer proactively provides its workers a good deal of economic security and benefits even without a union presence.

Chief among these companies is the natural-foods supermarket chain Whole Foods Market. Although the company is officially neutral on the right to unionize, Whole Foods CEO John Mackey has been opposed to the formation of unions at the stores, criticizing their “adversarial tactics” and “anti-business attitude and strategy.” Yet, as Mother Jones points out, the company is “steeped in the language and norms of the labor movement,” calling its employees “team members” and offering special committees of workers and managers to resolve disputes. More significantly, by most accounts the company offers an excellent living wage and benefits package, earning Whole Foods a spot on Fortune’s “100 Best Companies to Work For” every year since the list’s inception. Such benefits include: health insurance with a $10 premium for team members after about five months of work; company-funded “personal wellness accounts” to help cover out-of-pocket health expenses; company-wide votes every 3-5 years to choose the health and benefits packages the company should offer (provided from a list of options); transparent financial records; and capped executive salaries.

Whole Foods is not the first company to voluntarily offer its employees generous benefits; in fact, such practices, collectively known as welfare capitalism, were widespread in the United States during the 1920s. Employers had several reasons for experimenting with welfare capitalism. One was paternalistic: companies thought they knew how best to provide for their employees, and so would offer various educational and cultural activities to improve the lives of their workers. These ideas encompassed everything from “cafeterias, gardens, and profit-sharing plans to company housing, magazines, and athletic facilities.” Employers hoped that these rewards would boost productivity and morale, and cement loyalty to the company. Other managers had a simple corporate ethos: skeptical of legislative responses to social problems, they saw the corporation as the most responsible social institution, primed to take the lead in providing for its employees.

Whatever the ethical impulses behind welfare capitalism, self-interest also played a major role: managers wanting to retain control over their workforce had strong incentives to co-opt any budding desire to unionize. This impulse was strengthened as a result of the labor uprisings of 1917-19 and the general fear of government intrusion during the Progressive Era. As a result, companies went to great lengths to quash independent union organizing and strikes, often offering as an alternative company-sponsored versions of union features like dispute resolution panels. Some unions leaders were unimpressed by these concessions: Samuel Gompers, founder and President of the AFL, referred to company unions as a “pretense admirably calculated to deceive.” These critics were skeptical for two reasons. First, they believed unions would be capable of generating much greater substantive benefits for workers than their company-sponsored counterparts, since more topics would be “on the table.” Second, they doubted that it was “efficient, even moral, to give employees what they could obtain for themselves,” believing company unions would inhibit democratic principles and self-empowerment in the workplace.

It’s probably fair to say that Whole Foods’ conscious capitalist policies are grounded in some mixture of all three of these ideas. When John Mackey refers to his policies not as anti-union, but instead as “beyond union,” he likely believes unions are truly superfluous if workers are treated well by their employers. His response to unionization efforts are also likely informed by his well-documented personal distaste for unions. This impulse is captured by the union threat effect, “the tendency of nonunionized employers to respond to the threat of unionization by increasing the earnings and benefits of their workers.” Mackey acknowledges as much in his book, noting that a union organizing campaign in Madison [discussed below] was a “huge wake-up call” for him, prompting him “to find out where we had gone wrong and how we could improve.” Because he thought management could (and was willing) to meet employees’ demands in good faith, the fact that his robust benefits packages had the effect of stalling union momentum was, to his mind, both deliberate and beneficial.

Whether you credit the views of Mackey or his union critics might turn on whether you believe a union ultimately helps or hinders a company’s efforts to offer good faith protections to its workers. But that question depends on one’s underlying view of the employer in question. Unsurprisingly, people have different views about the core benevolence of Whole Foods, and it is difficult to gauge the aggregate satisfaction of a workforce in the thousands. A better question might be: Is a union better poised to identify, articulate, and negotiate for employee demands than the company is itself?

Whole Foods’ scant history with unionization may not fully answer that question. The only Whole Foods store to ever successfully unionize was in Madison, Wisconsin, in 2002. The experiment soon became contentious, as the newly-formed union battled management over store dress codes, rising health insurance costs, wage increase policy, and allegedly improper firings of union leaders. Each side accused the other of bad faith, and the employees ultimately voted to disband the union the following year, before it had reached a deal with the company.

Yet the Madison experiment cannot definitively settle the question of whether employer-sponsored pro-worker policies are more effective than unions, for it can be interpreted through a variety of conflicting lenses. On one hand, the Madison union articulated areas of dispute that it thought weren’t being proactively addressed by Whole Foods. This could show that the workplace harmony that supposedly existed without the union was more gloss than substance. Indeed, perhaps there were many issues employees were unhappy with, and the presence of a union finally allowed them to air grievances that had long been suppressed. Alternatively, the Madison experience could show that unions have a tendency to exaggerate conflict even when conditions are good for workers, needing to justify their existence by emphasizing dissatisfaction. Likewise, the ultimate decertification of the union could reflect the employees’ realization that their demands were better accommodated under the old system, or to the contrary, that while they wanted to proceed with the union, the company had put up too many roadblocks to its success.

Unionization drives at other Whole Foods locations have been scarce, but that doesn’t necessarily reflect employees’ lack of desire for representation. After all, union membership is declining in the country as a whole, which could signal that larger forces beyond Whole Foods’ policies are at work. On the other hand, perhaps Whole Foods employees really are satisfied with conscious capitalism and the wage and benefits packages the company offers, and do not feel a strong need to challenge the company in a unionized context.

While the Whole Foods experience with conscious capitalism is reminiscent of earlier themes in labor history, the company’s financial success is bringing new relevance to these ideas. It remains to be seen how many other companies adopt the Whole Foods approach to their workforces. How this debate unfolds across the economy as a whole will reveal much about the utility of this model of organizing the workplace.

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