PORTLAND — Les Schwab liked to talk about how his company’s unusual profit-sharing and bonus plans could build a nest egg for his employees, from managers overseeing his shops to the frontline workers swapping out tires on a hydraulic lift.
“That’s why I don’t like to talk about how successful I’ve been,” Schwab told The Oregonian in 1997. “I prefer to talk about how successful my employees are.”
Schwab died in 2007, though, and his descendants sold the company last year to a California investment firm, Meritage Group. Meritage initially said Schwab Tire would continue operating as it always had, but recently notified employees of one major change: It will stop paying an annual employee dividend that workers had long depended upon.
In recent years that amounted to an annual payment of more than $3,000, with all 7,000 workers getting the same amount regardless of their rank within the company.
“As you know, the dividend was a discretionary gift made by the family and paid outside of our company programs,” current Schwab CEO Jack Cuniff wrote in a January note to employees, obtained by The Oregonian/OregonLive. “With the change in ownership, the dividend program will not continue for the 2021 calendar year.”
Employees will receive their 2020 dividend this month, Cuniff said, and a separate bonus that is also paid annually based on their own store’s performance.
“Going forward,” he concluded, “we’ll continue to look for additional ways to thank employees for their incredible contribution to our company’s success.”
Les Schwab Tire Centers is among Oregon’s largest businesses, with annual sales approaching $2 billion and 500 stores across 10 western states. Its headquarters are in Bend and its lone distribution center remains in nearby Prineville, Schwab’s hometown.
Meritage didn’t disclose what it paid for the Oregon company, but when Schwab Tire announced plans to sell the business in 2019, Bloomberg reported that Schwab’s heirs were hoping the business would fetch $3 billion.
The decision to stop paying the dividend represents a major cultural test for Schwab Tire and its new ownership. Its bonus and dividend structure differentiated it from other retail chains and have been an essential element of its workplace culture.
Employees, who asked not to be named speaking about their company, noted that the $3,000 dividends represent a hefty share of their annual income. Tire dealers nationally pay an average annual wage of about $45,000, according to the Bureau of Labor Statistics.
It’s not clear whether Schwab Tire will create an alternative to the dividends to replace the lost income.
“Our employees are the heart of our Company, and we continually modernize and optimize our programs to ensure they remain competitive and highly valued by our workforce,” Dale Thompson, Les Schwab’s chief marketing officer, said in a written statement Tuesday.
“It’s absolutely our intention to provide our employees with outstanding programs, in keeping with the generous, special company Les Schwab is,” Thompson said. He did not say whether the company will continue paying the separate, annual profit-sharing bonus.
Schwab Tire delivered the news about cutting off the employee dividend in a larger note thanking them for their work last year and setting the date for their annual bonus and for their final, 2020 dividend payment.
“Our 2020 accomplishments are a direct result of your consistent delivery of World Class Customer Service in the face of what was one of the most challenging years we’ve ever had,” Cuniff, the CEO, wrote. “You are the Les Schwab difference.”