by Amy Martinez
Updated 1 years ago
Last August, with no fanfare or press release, JM Family Enterprises implemented a $16-an-hour minimum wage for all of its employees. JM — a 48-year-old firm that operates one of only two franchised Toyota distributorships in the country — made the new wage policy effective immediately.
As a result, about 400 employees got a raise overnight. Another 600 employees who already made $16 or more per hour also got a raise, maintaining the wage tiers that reflect different experience levels. In all, about a quarter of JM's 4,100-person work force directly benefited from the move.
Colin Brown, president and CEO of the family-owned company, which is based in Deerfield Beach, figures the decision will add $6 million to JM's payroll costs over the next 12 months. In 2014, JM had sales of $13.1 billion, making it the 21st-largest privately held company in the U.S.
JM increased its workers' pay at a time when income inequality is sparking a national conversation about what amounts to a fair wage. Labor activists have been calling on fast-food chains to adopt a $15 minimum wage. Health insurer Aetna recently began paying its employees no less than $16 an hour. Walmart is pledging to raise its base hourly rate to $10 this year, and debate continues over whether the federal minimum wage of $7.25 is too low.
JM isn't the first or only Florida company to boost wages amid the discussion of fairness. In 2014, C1 Bank in St. Petersburg announced a $14-an-hour minimum wage, a move that raised the pay of 27 employees. CEO Trevor Burgess says he didn't want any of the bank's employees earning less than $30,000 a year. First Green Bank in central Florida subsequently announced a similar living wage policy that affected 11 of the bank's 66 employees.
But JM's move is particularly noteworthy because of the company's visibility and standing in the Florida business community, the number of workers involved — and the fact that it didn't face the kind of pressure that usually motivates other businesses to raise wages.
David Cooper, who studies income inequality as an analyst at the Eco nomic Policy Institute, a Washington think tank, says it's rare for companies to raise their minimum wages. "More often than not," he says, "it's done as a business strategy or as a result of market pressures" to better compete for quality employees or to turn around bad publicity.
At JM, staff turnover, at 6% a year, was already low, and the company had no trouble attracting employees, Brown says. "We get a lot more applications than we have open positions."
JM, he says, simply wanted to ensure that its employees — or associates, as it calls them — earn enough to have a "sustainable quality of life. For who we are, we thought this was the right thing to do. And we could afford it."
The son of an American diplomat, Brown grew up in Europe and Southeast Asia. He says his childhood made him adaptable to change and widened his viewpoint. "I've seen different living conditions and different environments."
At 14, Brown returned stateside and attended Culver Military Academy in Indiana. He got his bachelor's degree at Williams College in Massachusetts and then a law degree at Duke University.
"I went to law school never having met a lawyer in my life, and I didn't know what I was going to do after I graduated," Brown said as the featured speaker for a Duke Law roundtable discussion in 2011.
In the mid-1970s, he moved to New York to work for a large law firm, gaining experience in a number of practice areas. A professor from his Duke days then persuaded him to move to North Carolina to become general counsel at Cannon Mills. After a corporate takeover pushed him out of that position, he joined Fuqua Industries in Atlanta, where he met a similar fate.
"I've worked for three corporations, and I've been fired from two. So I know what it's like to be fired and without a job," he says. "That probably has made me a little more empathetic."
In 1992, a friend of Brown's who had worked with JM as a relationship banker encouraged him to look at the company, and Brown applied to be its general counsel, despite knowing "nothing about the car business."
The company's founder, Jim Moran, a one-time Ford dealer from Chicago, had gambled in the late 1960s that Japanese imports could compete against the big domestic automakers.
Moran developed a relationship with Toyota, and his firm, Southeast Toyota Distributors, became the Japanese automaker's exclusive distributor of new vehicles in Alabama, Florida, Georgia and the Carolinas. Functioning as a middleman, Southeast Toyota buys the vehicles from Toyota, handles the work of shipping, prepping and accessorizing them, and then resells them to dealerships in the five-state region.
Adding financial, insurance and other services to the distribution business, Moran built JM into a financial powerhouse, but Brown arrived at a challenging time. The company was facing lawsuits from dealers claiming Southeast Toyota had forced them to do business with JM subsidiaries. The company also was accused of discriminating against African-Americans in awarding dealer franchises, prompting a congressional hearing in 1992, the year that Brown became its general counsel.
Brown settled all the dealer lawsuits, and JM established an annual awards program to recognize African- American leaders in south Florida. Every year, JM Family, Southeast Toyota and JM Lexus donate $40,000 on behalf of the honorees to the charities of their choice. More than $410,000 has been awarded on behalf of 137 African- American Achievers since the program was created in 1992.
Brown says that era was "a very unfortunate period of time in the history of the company. I came in and ultimately helped clean it up. But that's ancient, ancient history. There isn't another group that has a stronger relationship than we do with our dealers."
Mike Perrin, a longtime owner of two Toyota dealerships in the Atlanta suburbs, describes JM as a great partner and says he's "never seen anything like" what the company was accused of doing in the 1980s, adding, "You can be accused of anything." Perrin, who chairs the Southeast Toyota Dealer Council, says Brown is a straight shooter with a "very definitive moral compass. He's going to decide what's right, not what makes the most money."
By the time Brown joined the company, Jim Moran was serving as JM's chairman. Pat Moran, one of his three children, had become JM's president and CEO. She recalls interviewing Brown for the general counsel's job and being impressed with how dynamic he seemed. "Personally, we got along so well and always have," she says.
Brown was promoted to chief operating officer in 1997 and succeeded Pat Moran as president in 2000. In 2003, he became CEO, the first non-family member to run the company. "Our company was getting a lot larger and more complex, and we were looking to grow," she says. "There was no one else I would have chosen for the job. He knew our culture and the people, and he knew our family."
Brown has said that the hardest business challenge the company has faced came in 2008 and 2009. "It wasn't just a recession. It was a depression," he told the Duke roundtable in 2011. "By the end of 2008, our car sales dropped 40%, and we had to lay off over 700 associates."
Brown still describes March 2, 2009 — the date of the mass layoff — as one of the lowest points of his career. "I knew we had to do it to keep the company above water, but it was very painful, given that these people did not deserve to lose their jobs," he says. "I had my senior officers take a 65% pay cut. I took a 75% pay cut."
There have since been other challenges — Toyota's sudden acceleration problem and production slowdowns in the wake of the Japanese earthquake and tsunami. But the company is back to setting sales records, with 2015 poised to be "an-other record year" after 5% growth in 2014, Brown says.
A regular contender for the nation's top workplaces, JM has long been proud of its employee benefits, which include 401(k) contributions and profit sharing. The first Friday of each December is known as bonus day, when annual bonuses go out.
A year ago, to celebrate a strong 2014, JM surprised its employees with a second bonus check. "We were thrilled to do it, and there were lots of happy people," says Carmen Johnson, JM's general counsel.
Company executives worried that not everyone was sharing equally in JM's success, however. "A bonus, while terrific, really doesn't help people budget on a month-to-month basis," Johnson says. "It's not going to change their standard of living."
Brown assigned a group to study whether the company should raise its wage floor — and if so, by how much. The group then analyzed federal government data to get a sense of how much money an employee needs to make ends meet.
The group came back with a recommended minimum wage of $13 to $15 an hour, based on a "bare-bones" personal budget for a worker, Johnson says. Brown wanted to get employees to a "sustainable" lifestyle and decided to set the floor at $16.
"If you're part of our family, then we believe you deserve to have a quality of life," he says. "We wanted to make sure that people who live paycheck to paycheck have enough money to buy milk."
Pat Moran, who continues to serve on JM's board, says Brown told the trustees last spring that he was considering the possibility of a $16 minimum wage and got full support from the seven-member board, which also includes Pat Moran's two siblings and their father's widow, Jan; Brown is the board's presiding member.
The only pushback Brown received was for his sense of urgency, Johnson says. "He wanted it done in two weeks, and we said, 'Uh, it's a little more complicated than you think.' "
The idea of moving newer workers to a pay grade that compensated them as much as more experienced or tenured workers in the same type of job was an issue, she says. The company decided to extend raises to the first five pay grades, including about 600 employees who already made $16 an hour or more — they got an average bump in pay of a little more than 6%. Although that left three-fourths of the staff without a raise, most were happy for their lower-paid peers, Brown says. "We got a big lift in terms of people just being energized."
Brown says the wage hike will eat a little into the company's bottom line, but he has no plans for layoffs or other expense reductions. He declines to discuss profits in detail, except to say that they're big enough to cover the $6 million tab.
Brown now would like other em-ployers to follow suit and consider boosting pay for low-wage workers. JM's chief administrative officer, Ken Yerves, says that while some businesses "have commended us," none has asked how to go about raising its own base wage.
Russ Eisenstat, executive director of the Center for Higher Ambition Leadership, based in Burlington, Mass., says that increasing pay from the bottom up requires a CEO who thinks in the long term.
"It takes a strong stomach because you're making an investment upfront," he says. "You have to believe it's going to pay off over time in terms of lower turnover and higher productivity."
Eisenstat adds that family-owned businesses don't face the same pressure as publicly traded companies to produce short-term gains for shareholders. "Frankly, it's harder if you're a public company dealing with Wall Street," he says.
Brown makes the case that putting more money in workers' pockets is good for the economy and generates jobs. But he doesn't necessarily advocate for policy change at the local, state or national level.
A father of three, Brown has a grown daughter — also with a Duke law degree — who owns and operates a coffee shop in Durham, N.C.
"I don't think she could afford to pay people $16 an hour. So I'm not telling her she has to do that," he says. "On the other hand, I do believe people deserve to get a decent wage if at all possible."
Ultimately, Brown says, JM's raises were financially feasible and consistent with the company's corporate culture. "There are certain people who run businesses and treat people like they are a disposable asset. I think those people totally misunderstand what makes good business. If you drive everything only to the bottom line, you might gain in the short run, but you will not gain in the long run."
In 2014, about 40,000 workers in Florida earned the state's then minimum wage of $7.93 an hour. Tipped workers received a separate sub-minimum wage. Together, workers with wages at or below the Florida minimum made up 4.2% of all workers paid on an hourly basis.
Source: U.S. Bureau of Labor Statistics
In 2004, Florida voters approved a constitutional amendment that established a statewide minimum wage, tying subsequent annual raises to the Consumer Price Index. The Florida minimum rose to $8.05 from $7.93 in 2015 and will remain at $8.05 in 2016 because of low inflation. The federal minimum is $7.25, the same as it has been since 2009.
William Anthony, 35, does final vehicle inspections
Pay increase: 10.6%
How the raise helps:"My wife and I are raising three young children, and the increase has allowed me to provide for my family better. Now we save more, have more and do more, and that's been a blessing."
Victor Cabrera, 21, puts protective film on the front of vehicles.
Pay increase: 63%
How the raise helps:"I was out of work for a while before starting here, and I had run out of money. But now, I am actually planning to go back to school and pursue my goals."
Faye Diamond, 61, stages vehicles for the accessory shop
Pay increase: 30%
How the raise helps:"The minimum wage increase has allowed me to save more, and now I have more to spend on my grandchildren, too. I still have a little extra for my favorite activities like skating and bowling. I love working for this company, but like any job, we have days that can be challenging, so it's nice to reward myself and enjoy my time off."
Brianna Lester, 24, stages vehicles for the accessory shop
Pay increase: 60%
How the raise helps: "When I first found out that the minimum wage was going to increase to $16, I nearly fell over. This really came at a good time. My husband and I were struggling to pay the bills on time and take care of our 2- and 5-year old daughters. Now, we are caught up and are able to buy the things they need like clothes, diapers and school supplies. Before this it seemed like it was too expensive to do fun things with them."
Rich Wilson, 24, inventory specialist, JM Lexus
Pay increase: 66%
How the raise helps: Wilson, originally from Jamaica, lives with his mother and two brothers in Margate. He says he can now do more to help out his mother financially. "I was planning on staying here regardless," he says of the dealership. "But the raise made working here even better."
About JM Family Enterprises
Founded in 1968, JM Family Enterprises ranks fourth on FLORIDA TREND'S Biggest Private Companies list with revenue exceeding $13 billion. For 17 years in a row, the company has appeared in Fortune magazine's annual ranking of the 100 Best Companies to Work For. Employee benefits include tuition assistance, 401(k) contributions and profit-sharing. JM's headquarters has a gym, indoor swimming pool, child-care center, doctor's office and two cafeterias with subsidized meals. The company is arranged into five business segments.
- Southeast Toyota Distributors (SET) is one of only two U.S. Toyota distributors that operate separately from the Japanese automaker. Southeast has massive vehicle distribution facilities in Jacksonville and Commerce, Ga. It sells Scion and Toyota vehicles, parts and accessories to 176 independent dealerships in Alabama, Florida, Georgia and the Carolinas.
- World Omni Financial oversees Southeast Toyota Finance, which offers car loans and leases through SET's five-state distribution network. DataScan Technologies, a 2003 acquisition, sells wholesale accounting and risk management systems to lenders.
- JM&A Group is an insurance and warranty sales company that also provides industry training to dealers nationwide.
- JM Lexus in Margate is the largest-volume Lexus dealership in the world.
- JM Service Center handles information technology, procurement, real estate management and other shared internal corporate functions.
Jim Moran partnered with Toyota in 1968 to create the distributorship. Today, JM Family Enterprises is Florida's fourth-largest private company with annual sales of more than $13 billion.
Chicago car dealer: In 1939, Moran bought a Sinclair gas station for $360 and began selling used cars from the lot. In 1946, he established a Hudson dealership. In the mid-1950s, he launched Courtesy Ford.
Toyota distributor: In 1968, a friend telephoned Moran to say that Toyota was looking for a distributor in the Southeast and wanted to talk to him. "My response was, 'What is a Toyota?' "He test-drove a Toyota a week later and became "a believer," he said.
Postscript: Moran died in 2007 at age 88.