C1 Bank's decision to pay front-line employees more is paying off, its chief executive says.
The St. Petersburg, Fla., lender at the end of March announced plans to begin paying full-time employees a minimum "living wage" of $14 per hour. The new policy affects 27 of C1's 219 employees, with pay increases of 1% to 30%, according to CEO Trevor Burgess.
"We've been so successful," Burgess says of the $1.3 billion-asset company he co-founded in 2009. "We need to make sure that everyone is benefiting from that success because they're contributing to it every day in the trenches."
The decision drew attention given that a battle is raging in Washington over whether to raise the minimum wage above $10 per hour, and because it went against the grain of banks' steep cost-cutting in recent months.
Burgess says he initially decided to raise wages "out of a desire to do the right thing and be a good corporate citizen." Burgess himself was brought up by a single mother, and he says he recognizes the importance of looking out for people trying to make ends meet. But he also realized that offering higher salaries will help C1 recruit top-notch employees particularly the bank tellers who make up the majority of those helped by the pay increase.
"If I'm paying materially more than national banks are paying their tellers, I'm going to be able to attract and retain the very best people," Burgess says. Bank tellers earned a median wage of $11.99 per hour in 2012, according to the Bureau of Labor Statistics.
Burgess decided on C1's new base pay rate with the help of a living wage calculator from the Massachusetts Institute of Technology that determines "what people need to earn in order not just to get by, but live a good life."
C1 reported a profit of $12 million in 2013, more than double its 2011 profit but down 7% from 2012. The bank's Tier 1 capital ratio stood at 10.62% at Dec. 31, compared with 12% a year earlier.
The news of the pay increase has resonated with all of the bank's employees, Burgess says.
"When we announced it [in late March], you could see how proud our employees were," Burgess says. Walking around C1's headquarters, "you could just tell that even if they weren't one of the 27 people impacted, they thought we were doing the right thing for C1 bank. It's a culture-building thing that we are engaged in."
C1 also is benefiting from waves of good publicity.
"I didn't realize what a big story this would become," Burgess says, noting that the bank's decision to raise wages was the lead business story in the Miami Herald and has received coverage from publications including the Tampa Bay Times and the Tampa Bay Business Journal. "It's led to tons of people coming into banking center saying, 'I want to bank with C1 Bank because you're doing the right thing by your employees and community.'"
The move has even prompted some Florida business owners to reconsider their own pay rates.
"What is interesting is that a number of business owners have contacted me in the past week," Burgess says, asking him "'why you did what you did and how you thought about it.'"
Burgess is far from the only bank CEO to step out on topical issues. John Allison, the former chairman and CEO of BB&T (BBT), took a stand on eminent domain during his tenure at the head of the Winston-Salem, N.C., lender, refusing to make loans to private-sector development projects that sought to build on land seized by the government. Allison went on to pen a defense of free markets in 2012, blasting government agencies, politicians and "crony capitalists" like Goldman Sachs for causing the financial crisis.
Meanwhile, M&T Bank (MTB) Chairman and CEO Robert Wilmers has repeatedly criticized the nation's largest banks for their "stratospheric" CEO compensation packages. Wilmers also warned of the dangers of the income gap in his annual letter to shareholders last year.
"Our industry cannot ignore the fact that the growing divide between rich and poor it poses a threat to our democracy and social order," Wilmers wrote.
While Burgess says he had no intention of making a political statement, he's pleased to have triggered a broader conversation about employee wages.
"I'm glad if it has a follow-up effect on how we treat all employees and whether we do the right thing," Burgess says. And as his own experience has shown, companies that look out for their workers often reap what they sow.
"Sometimes doing the right thing can turn out to be really good business," Burgess says.