HEB Grocery Chain to Give Stock to 55,000 Employees

By HIROKO TABUCHINOV. 2, 2015

HEB, a regional grocery chain and one of Texas’s largest private employers, had $23 billion in net sales last year.CreditMichael Stravato for The New York Times

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As the plight of low-wage retail workers has gained national attention, HEB, a regional grocery chain and one of Texas’ largest private employers, is giving 55,000 employees an equity stake in the company.

The Butt family, which founded the San Antonio-based grocer 110 years ago, is handing an estimated 15 percent of the company’s shares to employees over 21 years old who have worked at least a year at the retailer and clocked at least 1,000 hours in a calendar year.

Managers at the retailer, which runs 370 stores in Texas and Mexico and had $23 billion in net sales this year, started informing employees who qualify on Monday, according to the company.

The plan is intended to recognize workers’ contributions and foster loyalty to the company, and enhance their long-term financial stability, said Craig Boyan, HEB’s president and chief operating officer. Under the plan, workers are able to cash out when they leave or retire from the company, and will also receive dividends based on the retailer’s earnings.

“So many in retail are competing in the race to the bottom, and people are the largest cost. So it seems logical to cut people, and lots of folks are doing it,” Mr. Boyan said. “We think that’s a trap. We believe the race for the bottom cheapens the American experience. It’s bad for the country and bad for companies.”

Mr. Boyan continued: “We think there is great benefit in a more empowered, inspired, proud, trained work force.”

HEB, started by Florence Butt as a tiny grocery store in Kerrville, Tex., would not be the first supermarket to experiment with employee ownership. Publix Super Markets, based in Lakeland, Fla., and WinCo Foods, based in Boise, Idaho, both attracted attention for their majority employee-owned status, as well as their rapid growth, which have earned them the moniker “Walmart slayers.”

But HEB’s outright gifting of shares to a wide swath of employees is unusual. Starting in January, eligible workers — the retailer calls its workers “partners” — are set to receive a grant of nonvoting shares valued at 3 percent of their salary, as well as $100 in stock for each year of continuous service.

“It’s exciting. It’s free money, pretty much,” said Veronica Solis, 39, who joined HEB in high school, bagging groceries, and now handles payroll at a San Antonio store. “I’m going to retire from here. I’m not going anywhere.”

The retailer said it would continue to make yearly contributions to the stock plan, based on company performance. About 55,000 of the chain’s 86,000 full- and part-time employees are expected to receive shares. Employees in Mexico are not eligible, for now, because federal laws that set standards for pension and health plans do not apply there.

HEB is now run by Charles Butt, grandson of Ms. Butt, and he and his family are ranked as the 44th-richest in the United States, worth an estimated $10.7 billion.

Labor groups across the country are stepping up demands for higher wages and more stable working hours in the retail and service industries. Activists have long denounced big-box retailers like Walmart for employing low-wage, part-time workers.

Partly in response to those pressures, Walmart, which is the nation’s largest private employer, announced in February that all of its United States workers would earn at least $9 an hour by April, and at least $10 an hour by February 2016. Some labor advocates, however, who are demanding $15 an hour for service workers, have called the plan inadequate.

HEB says the minimum starting pay for its cashiers is already $10.25, and that wage level is set to rise again next year to account for inflation. The retailer also offers health care coverage to employees who work more than 28 hours a week, as well as a company-matched 401(k) plan, which will be unaffected by the new stock ownership plan.

Mr. Butt, HEB’s chairman and chief executive, declined to comment on the push for a $15 hourly wage. Still, he said by email, technological advances in sourcing and distribution should allow retailers to pay their workers more.

“Pay and the price of food in our stores are of course inextricably linked. It’s a trade-off with which I have struggled all my business life,” Mr. Butt said. “Nothing is more price-sensitive than food. Nevertheless, we don’t see the conflict as immutable.”