Corporate – Current Issues In Media Management

Following up my last blog post about public companies announcing they would not be returning funds meant for small businesses is an article from NPR which discusses how Shake Shack is returning a $10 million federal loan after the Paycheck Protection Program (PPP) that was meant to help small businesses ran out of money in less than two weeks of operation.

The company will “immediately return the entire $10 million PPP loan we received last week to the Small Business Association (SBA) so that those restaurants who need it most can get it now,” their CEO said. Shake Shack employs about 8,000 people at its restaurants across the United States, but only around 45 people in each location. While their revenue to date marks a decline from 2019, the company has $104 million in cash and assets, says it has secured other loans to cover the money that would have come from the SBA.

Shake Shack’s CEO criticized the PPP system for being confusing by limiting the funds and setting the program to run through June 30 – “it’s inexcusable to leave restaurants out because no one told them to get in line by the time the funding dried up”. 74% of the PPP were for less than $150,000, according to the SBA- but that represents only 17% of the total money disbursed through the program. Nearly 28% of the money was awarded to companies seeking loans of $2 million or more. 9% of all approved PPP funds were granted to the food service and accommodation industry, roughly $30.5 billion.

I wanted to write this article because Shake Shack clearly did the right thing by returning the funds, but the PPP system that has been set up is indeed confusing and something needs to be changed. Yes, I think Shake Shack made the right, and ethical choice, but I don’t commend them for it simply because it would have been the wrong thing to do had they kept the funds. As the article stated Shake Shack has $104 million in capital, and as their CEO essentially said, they can afford to pay for some things out of pocket rather than take $10 million away from the majority small businesses that really need them (the 74% that were granted for less than $150,000).

https://www.npr.org/sections/coronavirus-live-updates/2020/04/20/838439215/shake-shack-returns-10-million-loan-to-u-s-program-for-small-businesses

An article from CNBC discusses several public companies that took small business rescue loans say they are not giving back the cash” discusses how not only did the Federal Government mistakenly give public companies and corporations the rescue funds that were specifically meant to go to small business owners, but many of these companies are now officially taking the stance that they will not give these funds back- all while the rescue fund for small businesses have been wiped out entirely and there is no more money to give at the time being.

CNBC reached out to the 41 biggest publicly traded companies that had received Paycheck Protection Program loans to see if they would be returning the funds. Six said they had no plans to return the funds, five said they will (or had) returned the money, while 30 either did not respond or said their decision was pending. One CEO keeping the cash said, “to return would be breaching fiduciary duty.” The government warned public companies on Thursday to return the relief loans in two weeks if they wanted to avoid scrutiny about whether it was necessary for them to take the capital.

I bring this instance up for a few reasons, first being why hasn’t Uncle Sam simply withdrawn those funds that were wrongfully given to public companies, and reallocate the funds to those small businesses that are still waiting and unable to receive any additional help? It seems that this mistake on behalf of our own government could easily be fixed, yet they are allowing the true mom-and-pop shops to suffer while corporate America continues to get more and more benefits (i.e. tax breaks, increasing salaries for executives, etc.). Simply warning companies that they will only ‘face scrutiny’ if they do not return the funds is a very weak threat. When congress wants something, they find a way to pay for it- don’t feed the public that there is no more available rescue funds for small businesses while the news is celebrating the frontline workers during the pandemic such as grocery stores, delivery/trucking, healthcare, many of whom work for small businesses and corporations alike- don’t make it a choice about who is in more need of help when the economy is halting.

https://delawarebusinessnow.com/2020/04/from-cnbc-several-public-companies-who-took-small-business-rescue-loans-say-they-are-not-giving-back-the-cash