Law & Principles
Ray Carter | December 1, 2022
Why did Paycom CEO endorse COVID shutdowns?
In March 2020, Paycom CEO Chad Richison called for Oklahoma to impose significant new COVID-shutdown policies, declaring those actions were required for “saving the lives of our fellow Oklahomans.”
More than two years later, research shows shutdown policies did little to reduce COVID infection and related deaths but did much to harm small businesses. And the response to COVID—including the adoption of shutdown policies similar to those advocated by Richison—had one other effect: It ultimately benefited Paycom’s status in the marketplace.
In a Feb. 10, 2021, earnings call, Richison said that “the pandemic effectively sealed the faith of the old model” in human-resource management and benefited Paycom by causing the “digital transformation of the human capital management industry” to reach “a critical stage where the accepted practice of HR and payroll personnel” being those who were “putting data for employees has come to an end,” according to a transcript of the call.
“The industry trend toward self-service has been leading to this point, and I believe the pandemic effectively sealed the faith of the old model,” Richison said, according to the call transcript. “Businesses must shift to provide employees direct access to the database because it’s better for the business and the employees. The coming extinction of the old model has been our expectation for many years, and I’m very excited to see it happening.”
The Oklahoma Council of Public Affairs requested further comment from Paycom on how the pandemic benefited the company and to what degree current profits are tied to COVID-related factors. As of publication, no response had been provided.
If Richison’s 2020 endorsement of COVID restrictions was driven by undisclosed personal profit motive rather than his publicly self-touted altruism, he won’t be the first business leader to have embraced that tactic. Experts say business officials have played that game when endorsing various government regulations for years.
“If we look throughout the history of economic policy and regulation, we do see all kinds of examples of companies advocating for something because it benefits them financially, but they don’t say that publicly,” said Jeremy Horpedahl, associate professor of economics at the University of Central Arkansas. “Publicly, they’re not going to say, ‘This benefits us.’ Publicly, they’re going to make some sort of argument that it’s for the greater good when they may or may not believe that. But ultimately, if it does benefit them, we should probably be skeptical of their arguments when they’re very self-serving.”
Michael D. Farren, senior research fellow at the Mercatus Center at George Mason University, said the public-interest theory of regulation holds that policymakers act off “the better angels of our nature” and devise regulations based on the “common welfare,” while the economic theory of regulation holds that regulators, the companies regulated, and policymakers are all self-interested economic agents.
Farren noted research has shown the economic theory of regulation does “a better job of explaining what we see in the world of regulation and how regulations are created and reformed” than the public-interest theory.
“There is the potential for regulations to be twisted to serve special interests as opposed to the public interest and common welfare,” Farren said. “The question is was that done with regard to COVID-lockdown measures?”
In many instances of “regulatory capture,” large businesses advocate for government regulations that generate new costs the larger company can absorb but a smaller company cannot, thereby reducing the likelihood of competition.
It appears the more businesses that were restricted in their ability to have routine work conducted in-person at a company headquarters, the more likely such businesses felt compelled to rely on outside entities like Paycom for human-resources management, based on Richison’s 2021 comments.
That possibility—or likelihood—went unmentioned when Richison was demanding broader shutdowns in 2020.
In a public letter released in March 2020, Richison called for temporary closure of a range of businesses, “which includes, but is not limited to, hair salons, nail salons, spas and massage parlors,” as part of the state’s COVID response. He also endorsed requiring grocery stores to provide “drive-thru pick up or delivery for all customers,” and mandating that undefined “critical” businesses be required to coordinate “with state government.” Richison also called on state government to mandate how “food preparation and other critical portions of the supply chain” are handled under undefined “newly established uniform standards to prevent transmission of the virus.” Richison also called for postponement of so-called, unspecified “elective surgeries” and endorsed having the government collect “all essential medical supplies” normally used for those surgeries or by “med spas and other medical organizations.” And Richison called for a ban on “all non-essential” travel from Oklahoma airports.
In his letter, Richison claimed those actions were needed to “curb this pandemic” and that his proposals were offered in “the interest of winning the battle against this virus and saving the lives of our fellow Oklahomans.” Richison signed the letter, “With Oklahomans at heart.”
Gov. Kevin Stitt ignored Richison’s demands and instead sought to minimize COVID closures. Stitt ultimately worked to reopen Oklahoma far faster than most states. Stitt was one of only nine governors nationwide to receive an A grade from the Committee to Unleash Prosperity for his handling of the state’s COVID-19 response.
A recent review found that if Oklahoma had embraced more significant shutdown policies, there would have been little real health benefit. A meta-analysis released in January by researchers with Johns Hopkins University found that “lockdowns have had little to no effect on COVID-19 mortality.”
“More specifically, stringency index studies find that lockdowns in Europe and the United States only reduced COVID-19 mortality by 0.2% on average,” the Johns Hopkins researchers found. “SIPOs (shelter-in-place orders) were also ineffective, only reducing COVID-19 mortality by 2.9% on average. Specific NPI (non-pharmaceutical intervention) studies also find no broad-based evidence of noticeable effects on COVID-19 mortality.
“While this meta-analysis concludes that lockdowns have had little to no public health effects, they have imposed enormous economic and social costs where they have been adopted,” the report continued. “In consequence, lockdown policies are ill-founded and should be rejected as a pandemic policy instrument.”
For businesses that were not enriched by shutdown policies, those policies had a decidedly negative impact.
In a 2021 column in the New York Post, Carol Roth, author of The War on Small Business, noted that small businesses “bore the brunt of lockdowns” with an estimated 400,000 small-business closures tied to COVID shutdowns.
Paycom has financially benefited from other government policies that created financial challenges for small businesses, such as the passage of the federal Affordable Care Act (ACA), better known as “Obamacare.” Following the passage of the ACA, many businesses had to hire companies like Paycom due to the complexity created by new insurance regulations.
In 2013, The Oklahoman reported, “Stacey Pezold, executive vice president of operations for Paycom, said the company—which has about 10,000 customers nationwide—is adding 300 to 400 new clients a month. ‘I’d say about 70 percent of that is because of the ACA,’ she said.”
In 2016, The Oklahoman similarly reported that Paycom “sees regulation and compliance as a big growth area, as employers wade through changes in insurance requirements through the Affordable Care Act and changes to rules on overtime pay through the Fair Labor Standards Act.”
Paycom similarly sought to capitalize on the Biden administration’s efforts to impose COVID vaccine mandates on much of the population by introducing a program allowing employers to “collect, track and manage” employees’ data regarding vaccination status or compliance with mandatory testing.
The Wall Street Journal reported that Richison had become the highest-paid CEO in the S&P 500 after he was awarded a 2020 compensation package worth $211 million, including restricted shares that experts predicted could ultimately add more than $2 billion to Richison’s fortune over a decade.
Paycom’s involvement in Oklahoma policy discussions has drawn increased scrutiny in recent years. Through the company’s attorneys at the McAfee & Taft law firm, Paycom recently sought, unsuccessfully, to chill Oklahomans’ First Amendment, free-association rights in court. The company’s director of government affairs also publicly lambasted Oklahoma voters after they overwhelmingly re-elected Stitt.
After Stitt rejected Richison’s demands for broader COVID shutdowns, Paycom’s CEO and many officials with the company became campaign funders for Stitt’s Democratic opponent in the 2022 gubernatorial race, Joy Hofmeister, and a member of Paycom’s board of directors cut a Hofmeister endorsement ad for an independent expenditure group.
During the campaign, independent-expenditure organizations spent millions of dollars on ads attacking Stitt. The governor’s campaign has estimated as much as $50 million total may have been spent on those attack ads.
Many of those independent-expenditure groups are not required to disclose their donors, so it is not publicly known if Paycom officials helped fund the attack ads.
While Paycom would not be the first business to advocate for regulations that ultimately improved its bottom line, the company may be relatively rare in having taken a public stance on COVID shutdowns that may have enriched the company.
“I don’t have any crystal-clear examples of companies that both benefited from it and were calling for more restrictions,” Horpedahl said, “but I would not be shocked to find some of those.”
“I just did not see any evidence of a particular company campaigning for, ‘Yeah, let’s lock down,’ in particular one that would benefit from it,” Farren said. “Probably the best contender would be Amazon, because everybody shifted to buying things online. Maybe Instacart or other grocery delivery services as well. I don’t remember seeing anything about Amazon taking public stances arguing in favor of lockdowns and store closures and things like that.”
Director, Center for Independent Journalism
Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.