By now a couple hundred of the largest companies in the U.S. have either given a bonus or raised the wages of their employees in response to the steep cut in corporate taxes from 35 to 21 percent. While that’s an impressive number of companies, it means hundreds more have not announced any benefit to employees.

Over the next few months you can expect the media to increase focus on a) how much money companies will save, b) where/how they will decide to spend (or not spend) it, and c) what questions those choices will raise, or answer, about the ways in which the new bounty of tax cuts is stimulating the economy for everyday Americans. Soon you will see direct comparisons between the cost of those one-time bonuses (relatively minor) and the full size of each company’s tax windfall (huge).

A couple of weeks ago I moderated a Page member conference call exploring how companies are making decisions about where and how to spend their tax cuts. I took away a few thoughts:

  • There will be pressure on companies to demonstrate that the tax cuts are generating new American jobs, especially when earnings are reported. Bonuses, while much-needed by employees and conveniently timed for the holidays, are one-time payments whereas the tax cuts are permanent. There will be questions about stagnating wages, overseas investment and operations, and to what extent the money is “trickling down.” Consequently, any executive bonuses, stock buybacks or dividends will be scrutinized.
  • Being ahead of these questions will matter. Companies that are taking public action related to these tax cuts are positioning themselves well, while those that aren’t may be missing an opportunity – or be exposing themselves to criticism. Leading companies are already committing to things like increasing capital spending and making contributions to retiree medical plans. Any investment that has a sustained effect will be regarded as a positive one.
  • Our CEOs need to be attuned to stakeholder expectations. We, as their advisors, must advocate for engaging with these stakeholders and taking the right steps to address their needs and interests. At the same time, we need to tell the whole story. Our leadership teams (ideally) make strategic choices about the future success of the overall enterprise. In other words, investments trickle down to employees in different ways that serve both the enterprise and its employees. For example, increased investment in skills training would benefit one’s career advancement opportunities and, by extension, their compensation. When communicating about how tax cuts are to be used, providing that full context will be essential. 

In my view, there is a brooding storm on the horizon. Economic expansion is great, but capitalism that almost exclusively benefits top executives and shareholders combined with rising income inequality is a recipe for disaster. The rising tide should lift all boats, and our role as leaders requires that we advocate for that. Otherwise, there will be big, fair questions asked, and the answers won’t be easy. 

I would like to thank the 30+ Page members who participated on that conference call. Page is doing more of these impromptu conversations about pressing issues, looking to get members more engaged in sharing their knowledge and insights with one another. If you’re a member, I hope you’ll try to join one in the future.