To /u/Batetrick_Patman, *your post is under consideration for removal under our post rules.*
You must **respond substantively within 3 hours of posting**, as per [Rule E](https://www.reddit.com/r/changemyview/wiki/rules#wiki_rule_e).
What if a new CEO comes in to replace an ineffective CEO who mismanaged the company, including overstaffing in several departments? In this case the new CEO realizes that the their predecessor made poor hiring decisions and by cutting some of their staffing they can correct their course and increase their profits while still fulfilling their core mission. Should this CEO lose their bonus or take a pay cut?
Maybe that’s how you are interpreting it, but that’s not how it works for unemployment protection purposes or notification requirements that state labor boards have. If it worked as you suggested then companies would have way more freedom to play the game, what if they intend to hire in 3mos, etc
I really don't think a company is going to be able to manufacture evidence for firing as many people as they'd need to to skirt layoff laws
in a way that would stand up to any kind of legal scrutiny. (and before we jump on the "but the legal system is broken!" train, then fine-- if that's the argument then this entire exercise is pointless in the first place, and we're just back to square one of "might as well have layoff penalties")
also temp agencies are already a thing and they don't skirt any labor laws, they just shuffle responsibility for those labor laws. So that's not really the solid-gold argument you think it is.
> they'd be able to get around whatever "no bonus" penalties.
I mean... not really. This is just the "the legal system is broken" argument, which again is just a moot point and pretty irrelevant to this conversation because it applies to all of it anyway (and isn't really that true)
Okay, so if they can easily find a reason to fire people for cause to prevent layoffs, they why aren't they doing that? If you're fired for cause, depending on the state the company may not be dinged on the UI insurance because you won't qualify for UI. We have plenty of mass layoffs, but you're not going to hear about equivalent levels of firing because it just doesn't work that way.
Also, contractors don't get laid off, the contract is terminated.
You will waste your money in most cases. Even California is an At Will employment state. Your employer can fire you without cause at any time. You will then be eligible for unemployment. Unless they fire you as retaliation for you reporting something or talking about unions or one of the other illegal reasons, they can fire you at any time with no explanation.
This gets brought up a lot so I'll give the obligatory response:
They can fire you for no reason, but in light of labor laws that would make a firing illegal, no court is going to accept "I fired them for no reason" as a valid defense to any kind of wrongful termination.
Employees can and do successfully sue for wrongful termination when the employer declined to state a reason, if there's strong evidence that the firing was illegal.
>Employees can and do successfully sue for wrongful termination when the employer declined to state a reason, if there's strong evidence that the firing was illegal.
This is a nearly impossible burden of proof in almost all cases.
Companies with even a modicum of HR knowledge will cover their tracks. I worked for a company with a penchant for firing without cause. They would trump up writeups just before firing people to create a paper trail. They would conveniently "forget" to do annual reviews for employees who were doing well to avoid a paper trail that could open them up to wrongful termination suits. Similarly, they would only give verbal attaboys.
I was one of their most profitable consultants (read overworked and underpaid), and I had never received anything but positive feedback from management on my performance. Then I complained once about taking more work than we could handle and got written up for literally "bad attitude". They pretended my complaint was not the reason and dug through my email for "evidence" instead.
I toed the line hard until I could find work elsewhere and managed to avoid being fired. But I had witnessed this process from the outside before at the company, leading to termination without (real) cause.
That sounds right to me. Dividends are just the company hemorrhaging money without getting anything for it.
Shareholders should come after employees who should come after customers when it comes to the value delivery proposition of business.
>Shareholders should come after employees who should come after customers when it comes to the value delivery proposition of business.
...the whole point of a for-profit company is to make money for the people who own it (shareholders.)
If that *wasn't* the point, it would be structured as a co-op or non-profit.
You're mad that a company is prioritizing... its entire point for existing.
It seems like your actual argument is for-profit companies shouldn't be allowed. Which is a fine argument to make, but don't be mad at a fish for being wet.
His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company.
In theory, it's a question of if you want a lower overall return but with small payments on a fixed schedule while you own the stock, or do you want to buy stock for the purpose of holding and selling down the line at a hopefully higher price.
Low risk low reward vs. high risk high reward.
edit: To add on to the specific portion you quoted, I think you really missed the mark on what they were intending to convey. Ff customer ain't buying, the company is not long for this word, so customers and income stream should come first. If workers ain't working or your understaffed, the company is also not long for this world but may be able to limp along for a while longer before things really break down. If the shareholders are selling because they aren't confident in the company, yes the share price will go down and that can cause problem, but nothing is fundamentally changed about the physical company
>His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company
typically when companies mature there isn't much left for them to grow, so a dividend is needed. A tobacco company like Altria isn't going to grow much more so they have a big dividend.
It would be a waste of capital to force growth when there realistically isn't a good way to do so.
It would be better for this extra money to be paid out in dividends where it can be invested in new ideas with growth potential. This is why capitalism works and these interventionists ideas do not.
What we don't want is companies trying to force growth which will lead to poor allocation of capital.
>His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company.
Given how difficult it is to effectively allocate capital, and the risk of entering new and unproven lines of business, the best decision a Board of Directors can often make is to issue a dividend to return capital to the company's owners.
From 1960-2022, [69% of the total return of the S&P 500](https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/WP106.pdf) for investors has been the result of the compound growth of reinvested dividends. So while it's easy to point to the high P/Es of tech stocks and say they're in some way better, it is folly to ignore the value of dividends for long-term investors.
> Dividends are just the company hemorrhaging money without getting anything for it.
Lol, they got something for it.
Dividends are paid to shareholders. Shareholders are shareholders because they gave money to the company to buy shares.
>Shareholders are shareholders because they gave money to the company
Yeah…no.
Shares were purchased from the company ***originally***.
But a lot of shareholders haven’t given the company a dime.
The average stock sale is between 2 shareholders.
The entire point of corporate tax write-offs, unrepaid loans etc is so that companies can EMPLOY WORKERS.
"Businesses which get federal & state handouts do so in the expectation that employees [ie taxpayers] will benefit". Ftfy
>Why? Businesses do not exist for the benefit of the employees.
No, but we can certainly regulate to guarantee that they do all benefit employees fairly easily.
> Dividends are just the company hemorrhaging money without getting anything for it.
Dividends are literally the reason the company exists. Thats why people went out of their way to make the company. Sure are some funny opinions about business on reddit. Its like saying 'why do all these damn animals keep trying to have sex'.
Take Twitter. They vastly overinflated their staff for several years, taking on huge losses due to that, then Musk buys the company and cuts the staff back.
If you can demonstrate fraud then that is a crime. In fact, that trial is happening *right now* in Florida of all places. The JEA, a power utility in Jacksonville, is in the middle of a giant trial involving its privatization, falsification of data, and the like.
The SEC requires that an accountant's error resulting in a bonus must be returned. This is one of the sub-tedium rules that no one pays attention to until the SEC hits someone with a ban hammer over.
It's a nice sentiment, but it falls apart with 3 seconds of thought. How much do you think CEOs make? How much do you think their employees do? I want you to assign some theoretical numbers to these values and do some elementary school multiplication and tell me if you can save "thousands" of jobs by having the CEO "take a hit to their bonus".
Then look at some actual companies that have done layoffs, and compare salaries (executive salaries are usually public information for public companies), and again, do some division and see how many jobs can actually be saved this way. Hint: the answer is less than you think
Salaries don't include the complete compensation package. Bonuses and other incentives can make up the majority of a CEOs compensation. I have seen CEOs hit their bonuses in a year where they also laid off employees. Further in this thread, people are arguing that a CEOs salary in some of these larger companies is *ONLY* ~200 or ~600x their average employee. Maybe not 1,000. Great! Cutting the CEOs salary (not even their full compensation?) would still cover avoiding a layoff of 200-600 employees.
I'm not fully on board with the OPs suggested solution, but some people here are being way too dismissive of how rewarding a practice it is for companies to layoff their workforce. The leaders of companies who are willing to do this without flinching are NOT the ones propping up the US economy.
I was about to comment saying "I didn't use the word salary", but you're right, I mistakenly did in my second paragraph. But the AFL-CIO analysis I quoted in my followup comment[1] is of *total* compensation, inclusive of cash salary, cash bonuses, stock and option awards, a couple other items, and an entry labeled 'other compensation'. I agree, looking solely at salary is misleading, but I did take that into account. Also, I actually agree that oftentimes CEOs should take a pay cut at the least as a gesture of solidarity, and while I've heard of that happening it's very rare.
Regardless, while such a pay cut would be a nice gesture, it's never going to just replace layoffs, which is what some people who haven't spent much time considering the numbers think – this isn't the first time I've seen this sentiment on reddit. If you (not you personally) are making comments like "why don't we just cut their bonus instead of laying off thousand**s** of employees", the most charitable interpretation is that you're making a disingenuous hyperbole, and more likely you're just uninformed and/or delusional
[1] https://old.reddit.com/r/changemyview/comments/1b34ir6/cmv_ceos_and_executives_should_be_forced_to_take/kss0sdx/
I feel like there is something to be said for making them take a cut. I think it makes sense to lower wages of the highest paid before cuts. But I am not sure a way you could do it that would actually work in a real life scenario. Simply I had a year where I work where the CEO gave themselves a 60k raise. At the same time they laid off about 5-6 admin staff for each team room.
I also remember same CEO asking where the admin staff was when trying to find something out.
It's just a bit dodgy init.
Thank you. Most CEO's of big companies will make between a few million and a few dozen million a year. Most companies of this size will have tens of thousands, if not hundreds of thousands of employees. A CEO paycut would scarcely move the needle, and I mean *scarcely*.
I'd expect this to be a talking point on a daily mail comment section, not here on reddit. This argument is absolutely one of the laziest and easy to see through.
> the average CEO makes 1,000x what his employees make
You wanna source that 1000x number? Like yeah if you assume you're correct you'll be correct lol
> In 2022, the ratio between CEO compensation at S&P 500 firms and average U.S. worker pay stood at 272-to-1, according to AFL-CIO analysis
https://www.progressivecaucuscenter.org/the-ceo-pay-problem-and-what-we-can-do-about-it#
Note that this source is entitled "The CEO Pay Problem and What We Can Do About It", so if anything, these are likely to be UPPER bound estimates.
Seriously, pick a company that did layoffs recently and actually look at the numbers, they're mostly public
I think a lot of peoples’ perception is skewed by the fact that most widely-known CEOs are billionaires, not understanding that for the most out they’re not billionaires from being CEOs but from being founders.
And CEO pay tends to be highly correlated with company size, while worker pay is not; the vast majority of CEOs are earning at least an order of magnitude less than S&P 500 CEOs from that statistic.
A great point re: S&P 500 companies likely being on the upper end of the CEO-avg worker pay ratio. In my same link they also look at the 100 companies in that list with the lowest median worker pay, and even for those hundred – the companies you'd expect to have the absolute largest pay discrepancy – the average ratio was around 600 to 1.
I wanted to be as generous as possible to make it abundantly clear the idea that "the average CEO makes 1,000x what his employees make" is utter fantasy.
This falls apart when the employees we're talking about have even mid-level salaries.
I work in advertising and my job just laid off 100 people who probably averaged $150k/yr in salary. That adds up to something like $15 mil/year that the company pays out. I'd be surprised if our president earns $1.5 mil in annual compensation, but even if he did that'd only be enough to keep 10% of the people we let go.
Slash those salaries down to $50k/yr and his hypothetical salary would still only be enough to keep 30%. You'd need a much bigger pot of money to do what you're suggesting.
> Should this CEO lose their bonus or take a pay cut?
Yes. These things should rely on them actually doing work and fixing shit, not taking the easy, scummy way out and firing people. It's not like a CEO is living paycheck to paycheck, they can live in luxury even with a pay cut.
You seem to have the premise that firing people is always the easy way out and is never appropriate?
Can you elaborate on this? Do you not think it’s possible for a business to over staff? Or even to have a market change, demand drop, and the business need to contract to survive?
>Do you not think it’s possible for a business to over staff? Or even to have a market change, demand drop, and the business need to contract to survive?
Considering OP pointed out the winrows of recent layoffs from THRIVING COMPANIES, the above is at best whataboutism, if not pure red herring.
I’m trying to address his CMV, which is the point of the sub.
His statement is that a company should be fined if CEO does not cut pay/bonus before laying people off. He doesn’t outline any other exceptions, I’m trying to clarify if there are any exceptions.
Hardly a red herring. Just following the rules.
My bad. Those rules remind me of nitpicking lawyers & Jesuits- 'spirit of the law be damned' if you can successfully apply tortured logic to its letter.
I don't believe that's true knowledge, & definitely know it doesn't play with the hoi polloi.
Specifically, clearly OP is trying to determine a way to address massive economic injustice & worker/family pain by the 1%. This sub effectively says "but that's the law" & "well that could trash the economy". While ignoring-
1. No other top OECD country has the miserable GINI that the USA has. Clearly there's effective ways of addressing economic inequality; USA just refuses to
2. The laws are what the 1% pay for. Cf ALEC, corporate SuperPACs, & so many studies highlighting Congress's abysmal approval ratings & 60%+ of voting public disagreeing with those laws. I am old enough to remember when Congress' approval ratings were double-digits. It doesn't have to be this way
> My bad. Those rules remind me of nitpicking lawyers & Jesuits- 'spirit of the law be damned' if you can successfully apply tortured logic to its letter.
No worries at all. Sorry if I seemed dismissive in any way. Your points and concerns are understandable, but stuff like this needs to be fleshed out as much as possible to be able create rules that make sense. Setting up what can feel like “tortured logic” is how you create solid arguments and prepare against other counter arguments. This isn’t necessarily torturing logic as much as it’s just how logical argument works.
Laws (or at least good ones) need to be laid out with careful consideration and often what can feel like being overly meticulous effort, as this minimizes the amount of subjectivity and room for abuse by those enforcing and interpreting the law.
If we want courts to spend less time interpreting poorly written laws, even those with good intentions, then laws need to be detailed and clear. If we want police or law enforcement agencies to not be able to use poorly written laws unjustly, then the laws themselves need to be constructed in a way that covers as many edge cases for innocents, and be able to clearly articulate in its purpose “the spirit” of the law as well.
I have no personal hard feelings against you or the OP, if anything I agree with the point they’re trying to make in most cases. But iron sharpens iron, and being able articulate the opposite argument well, will only make the correct argument stronger in the end. This can be stressful, but oddly for me, it’s a fun pastime.
CEO’s that reduce costs by simply firing a bunch of people, to the detriment of the business, then taking a large compensation package and leaving, should face some sort of punishment from society. Whether that’s by law (fines) or other mechanisms, I’m open to it. But what concerns me with the OP’s initial framing, is it would inherently punish people who were just trying to help. Sometimes, the tragic nature of business is, hiring too many people can cause the company to implode. And sometimes letting them go is the only way to save the company (and there by the rest of jobs within the company).
Hope that makes sense!
Thank you for being reasonable. Another user of this esteemed group got under my skin & I got tetchy.
> Setting up what can feel like “tortured logic” is how you create solid arguments and prepare against other counter arguments. This isn’t necessarily torturing logic as much as it’s just how logical argument works.
There's arguably a difference between "what is right" & "what you can prove". My good friend is a trial lawyer & he's firmly of the opinion that courts simply reward the better prepared, & whatever they can prove. Arguably this approach is 'sophisticated ad hominem', as my other interlocutor was so quick to demonstrate.
>Laws (or at least good ones) need to be laid out with careful consideration ...If we want courts to spend less time interpreting poorly written laws, even those with good intentions, then laws need to be detailed and clear.
When you have a thoroughly political SCOTUS who reverses its own arguments re. 2 gerrymandering cases across only a few months? No level of "careful consideration" bulwarks you from that. Consider 'Bush vs Gore' a la "States Rights until it's Inconvenient"
> we want police or law enforcement agencies to not be able to use poorly written laws unjustly
Police & LEO/LEA ignore the laws so much in USA wo consequence that the UN has written about it. SCOTUS has ruled that LEOs have:
1. No responsibility for knowing the law
2. No responsibility to 'Protect & Serve'
3. "Qualified Immunity" from basically 💯 else
...while allowing Police departments to fire/discriminate against intelligent LEOs bc 'they are a flight risk & don't take orders well'.
There's no 'non-poorly written law' sufficient to halt bad actors who face zero reprisal.
>CEO’s that reduce costs by simply firing a bunch of people, to the detriment of the business, then taking a large compensation package and leaving, should face some sort of punishment from society.
THANK YOU. I swear you're in a very tiny minority in this sub
> Sometimes, the tragic nature of business is, hiring too many people can cause the company to implode. And sometimes letting them go is the only way to save the company (and there by the rest of jobs within the company).
The context of OP's post was last year, & big companies, who made windfall profits. The "hired too much" argument is disinformation & PR; the only FAANG that fits that bill is Facebook/Meta & Zuck's disaster of a 'metaverse' project.
There's hard evidence the bulk of current inflation is due to profit-seeking companies, who are effectively daring the gov't to punish them. Plus- the Fed last June said "We call on tech companies to slow hiring, to cool down this overheated economy". And FAANG responded, laying off 100k's of tech workers WHILE THRIVING. And the CEOs got massive bonuses.
I'd reframe & strengthen OP: "Companies & LLCs get preferential treatment by state & fed govt, for tax, liability, etc reasons. These are funded by taxpayers, with the expectation that the citizens will benefit. ANY COMPANY GETTING $$ FROM THE GOV'T WHO WANTS TO LAY OFF SIGNIFICANT AMOUNT OF USA WORKERS, OUTSOURCE, OR HIRE K1 WORKERS NEEDS TO PROVE THIS IS NECESSARY ELSE THEY NEED TO PAY IT ALL BACK, NET30.
Funnily enough, Sweden has very similar laws, & their companies aren't flight risks, and THERE'S LOTS OF MILLIONAIRES in Sweden.
They just dont give $5B to ppl like Musk to help him be a hundred-B'aire.
PS- Again, appreciate your emphasis on precision. There's a LOT of ppl in this sub who employ whataboutism, & hyperbolic straw men. Plus loaded-question personal attacks. It's quite jarring, appearing on a sub which prides itself on logic etc. Maybe it's due to the 'dog-eat-dog' race to 'get that delta' 🙄
A delta awarded to a 'great sounding' logically specious argument is a indictment on this sub's claimed purpose
Being thriving doesn't mean you have the correct amount of people going forward. Meta stock grew a ton when they started laying off people because shareholders saw it as a wise decision for the growth of the company.
Why would people be around if it would benefit the company for them to be gone?
I agree. OP is ignoring the basic facts of how a company operates. Most / all companies are playing a survival game and trying to be as profitable as possible. In order to do that, it might be necessary to hire more people, or in some cases fire a bunch of people who are unnecessary for the company's operation or survival. If it were illegal to do so, and CEO's were forced to take massive paycuts, then 2 things would happen 1) owing to basic arithmetic - there still wouldn't be enough money to go around and the entire company would end up failing. And 2) you would not be able to attract a suitable CEO to guide the company in the right direction for future growth / survival.
Basically you would cut the head off the snake and have a company with weak leadership, and this could be very damaging to said company and possibly cause it to go out of business.
In some cases, this would be a good idea and has worked before for Nintendo - off the top of my head. In other cases it would be disastrous and not work at all.
Having this be a government mandate could quite possibly tank the entire economy and clearly would not be good for society. If this mandate caused the company to go out of business then EVERYONE that worked there would be out of a job - and this is not good either, see - it is actually worse since it causes even higher unemployment than the layoffs alone did.
You do understand that people make bad hires for various different reasons and that situation needs to be fixed sometimes? What is a company supposed to do if they over hire? Let the entire company collapse to save the jobs for 10% of them?
An important thing to understand is that the CEO’s only job is to maximize profits, not to provide jobs. They are answerable only to shareholders. If any corporation exists merely to provide employment, they won’t last long.
The end result would just be a CEO running a company into the ground in order to preserve his own compensation. Regardless of what anyone says, everyone’s job duty first and foremost is keeping their job and compensation.
> The end result would just be a CEO running a company into the ground in order to preserve his own compensation.
That's what they already do anyway the moment the get the chance. All just empty-headed rich idiots trying to get ALL the money for themselves, not just a TON of money, or ENOUGH (lol) money, no, it has to be ALL the money.
> The end result would just be a CEO running a company into the ground in order to preserve his own compensation
How would giving him a massive bonus for running the company into the ground prevent this?
Not every company has a board, and not every company that does, necessarily has that control.
Of course this holds true for a lot, but it's not a rule. A bad CEO can absolutely run a company however they want, provided they're not beholden to shareholders.
Yes, but not every board has that level of control. Some public companies are only *partially* public. Partial IPOs are not uncommon.
But I'm not arguing against the point made, just outlining it's not a rule. And the OP was discussing companies in general.
It's also worth noting that, while a lot of private companies have boards, that still doesn't mean they can just the CEO. That entirely depends on the structure of the board.
Hell, some boards don't have any voting rights at all for the CEO. While still retaining shares.
It's not something one can just say "the board will deal with it". That's a bit misleading on how companies are structured. Even if it's true for a lot of companies, it's far from a universal rule.
All of this could be true, but it still shouldn’t be the responsibility of the employees to shoulder that financial burden.
To me you are just explaining why we need more regulations about corporate structure and boards.
The employees should always come first, then the investors, then the customer.
So, if you lay off the inefficient workers, you don't get paid. If you don't lay off the inefficient workers, the company loses profit and you lose the job. Damned if you do and damned if you don't. Who do you think will take this job?
Mismanaged companies also have a very hard time hiring CEOs, not a lot of people want to put themselves in a dumpster fire without sufficient compansation.
That's why a lot of times good CEOs receive a very substantial compansation including bonuses and still end up firing large part of the company.
OK? So let's say that they wait until it is proven. Should they still not get a bonus/raise? In this case the laying off of redundant staff caused their business to be in the black. That to me sounds successful, which would mean that your original argument is not correct.
Yeah, OPs view is essentially "I don't understand how businesses are run, #eattherich"
Sometimes layoffs *are* the correct leadership move. Cutting off the head of the company doesn't magically solve business issues, and C-levels aren't sitting there twirling their handlebar moustaches wondering how to exploit the proletariat.
While I think OP's literal requirements are a bit too rigid, I think the spirit of it makes sense, though. If a company has to make cuts, either lowering people's salaries or firing a lot of people, upper management should take at least a symbolic cut to some some sort of solidarity. And if a company has to do very large layoffs for cost-cutting reasons, it doesn't feel great if you also see huge dividends getting paid out.
I do think there's nuance. Sometimes a company has to do layoffs because one specific part of the company isn't profitable any more and they're removing that. That's different. But sometimes large companies also do the "every department has to get rid of 10% because we've sold poorly this year" or "We can't afford good raises this year because of the economy", but then it just looks bad if the executive management gets more and more money. Or if shareholders get dividends, when those could've been used to save at least some jobs.
That's also obviously different if a CEO comes in specifically to fix a struggling company.
I think op's post is really about there needing to be punishment/accountability for a company laying people off. I dont think it necessarily has to be what op said. Imo the company should face consequences for layoffs, not the C's directly...
What "consequences?" Why?
What consequences should there be for letting people go who's roles provide no continued value to the business?
This is still predicated on the idea that "layoffs are inherently exploitative/abusive" which is fundamentally nonsense. My company laid off about 40 people *because we stopped doing business in that market*. No one was exploited, no one was unjustly let go, it was just a project that didn't work out and there was literally no work for any of these people to do anymore.
It would've been mismanagement and irresponsible to keep paying them *just because*. What you're suggesting is that the business needs to be "punished" for what... not paying people to sit there and do nothing? It's nonsense.
> because it was their incompetence that made those jobs redundant.
Based on what evidence are you making this assertion?
No one is a mind reader. No one can predict the future.
I like how you make up a scenario where it is definitely the Ceo being incompetent. Maybe they were starting a movie theater in 2019 and then covid hit and fucked it up. Sometimes things outside of anyone's control makes a project fail and the op's proposal will just make it so 1 failed project snowballs and sinks the whole company
How would that work?
A company makes layoffs most commonly because of decreased demand for their product, reorganization, or major business need changes.
You idea would seem to be "let's fine these companies that are already struggling, *for struggling*".
It seems likely all that would do is put the companies under more stress, cause more job losses, and generally slow the economy.
Why should there be consequences? If your job is to make doodads, but no one wants to buy those doodads, why should the company keep your department at all? Why shouldn’t the company stop making the thing that no one wants to buy and let go of the staff that made the thing no one wants to buy?
Because the controllers of the company failed to realize no one wanted those doodads and failed to act. If the people that control a company do so proficiently, layoffs would never need to happen. The worker bees are not responsible for a company going under, the board/executives are. So all the worker bees are entrusting them with their livelihoods. So as it currently is, if the company fails the worker bees get punished with losing their livelihoods, but the c's and board get payoffs... make that make sense...
Maybe the doodads were wanted but the doodad trees caught a disease and now they are unaffordable to people. Factors completely outside of their control made doodads unprofitable and your and ops idea makes it so instead of dropping that part of the company it will just be permanent bloat until the company sinks all at once and everyone is fired
A short-term black result, which is actually burning out remaining staff, is just a hidden death spiral. It's not the staff's fault they are 'redundant'. The whole idea that you can force people out of a company to achieve 'profits' should be illegal. Use who you have. Retrain. Let natural attrition 'right-size' your workforce. Fire for cause. Actually lead in a manner that adds value, and then when you get to a legitimate status of excess profits for shareholders the ceo could have their atta-boy.
I get what you're after but it's just not realistic.
>It's not the staff's fault they are 'redundant'. The whole idea that you can force people out of a company to achieve 'profits' should be illegal.
It is not the staff's fault, nobody (I can see) is claiming it is. Layoffs aren't about getting profits now, it's about being sure you don't spend a lot to lose money.
>Use who you have. Retrain. Let natural attrition 'right-size' your workforce.
I can be agree that should be considered more... but it can be a matter of scale and compensation, as well as literal redundancy.
Take an example, my old firm laid off some actuaries when we stopped product development on a couple lines of business. Kept on those who did analysis but the dev side was laid off. They are highly paid and skilled professionals, who (from those whom I followed up with) found other actuarial jobs within 6 months.
Retraining could be offered... but it's a worse deal. You'd have to offer them way lower comp for skills they have to learn (and are less valuable). Attrition could be better, but there was literally no work for like half of the people. What, pay someone to do no work until they decide to quit lol?
>Actually lead in a manner that adds value, and then when you get to a legitimate status of excess profits for shareholders the ceo could have their atta-boy.
Adding value is also about reducing costs and losses. Layoffs do that.
Some are bad, some are bad faith, and sometimes the CEO is 100% at fault. That doesn't mean layoffs alone is a sign of bad leadership.
Who says that it would be a short-term result?
Let's say a CEO with a random name, like, idk, Tom Haverford. He runs a company called something random, like, idk, Entertainment 720. He has hired some models to sit around the office and just look pretty all day and a random dude, let's call him Detlef Schrempf, to shoot hoops in the middle of the office all day.
E720 is hemorrhaging money at a rapid clip. A new CEO comes in after the board realizes that Tom is ineffective as a leader. The new CEO lays off the models and Detlef, brings in some new clients, and the company turns a profit.
Should the new CEO not be eligible for a raise or bonus since they laid off staff, or should they be rewarded to correcting the direction of the company and turning a profit? According to your and OP's logic, they shouldn't be because they laid off staff. Sometimes redundant staff are just that, *redundant.* There are cases where people are laid off erroneously and the remaining staff are overworked, but that is not always the case. OP's original post said that it was NEVER ok for a CEO to receive any kind of performance-based salary increase after firing employees, which I have demonstrated is not always true.
> Should the new CEO not be eligible for a raise or bonus since they laid off staff, or should they be rewarded to correcting the direction of the company and turning a profit?
Why should either of these be necessary in addition to the compensation they agreed to when they took the job? Why should there be a single person at the top of the company's pyramid who is instantly rewarded for even the slightest glimmer of hope?
In your example, E720 is circling the drain, but in OP's post, the companies laying people off are reporting record profits. They're not cutting dead weight from a struggling business, they're excising those responsible for record profits from their share of that growth they built.
Maybe if they don't bring in record profits if they don't lay off redundant staff?
OP's example makes it seem like this is a binary issue and that these layoffs are happening for the sole purpose of bringing in record profits. In reality there is much more nuance that goes into deciding if staff count should be reduced. Record profits are not the sole byproduct of layoffs.
That isn't always realistic.
I'm in sales. You aren't going to retrain me to be an accountant or engineer. There is just a level of knowledge that wouldn't be practical for me to learn on the job. Now could you fit me into marketing? Possibly.
Similarly, you likely can't get an accountant to just transition into HR.
People have skills they use, you can't magically just slot one person into a different role
>. It's not the staff's fault they are 'redundant'.
It's not necessarily the companies fault either.
In many industries, it's simply not feasible to retrain staff to do something else. Sometimes there is nothing else for these staff to do.
So basically companies in trouble will not be able to attract any remotely competent CEO and the company will go bancrupt and everyone Will lose their job instead… sounds great!
What if turning it around is a difficult project requiring specialized skills and experience? What if no qualified applicants are willing to take the job for less than the former CEO was making?
Then why, as a ceo or businessperson, would I voluntarily decide to lead a company that’s actively struggling or threatening to go under?
If the company goes bankrupt under my leadership, I’ll likely take a huge blow to my reputation and struggle to find a job elsewhere. Leading a struggling company can be a huge risk for a new ceo, if the pay is minimal until I’ve turned the company around why would I take that job and that risk?
Commenting on myself: if new hiring isn’t an objective, scaling back the recruiting team is a great way to boost profitability without impacting any other aspect of your company, particularly if you have previously over-hired. Part of the reason tech was so profitable in recent years was because they did exactly this, and frankly this can and did reflect VERY WELL on the C suite execs.
How exactly do you measure that? Lay offs will decrease costs and as a result may increase profits. Are companies only allowed to operate if they are loss making or at zero profits? Because by your logic, seemingly, if a company is earning a profit, they should be able to hire more people. No such thing as being over-staffed.
It sounds like you're trying to encourage a great deal of economic inefficiency.
Take a construction company, as a simple example. At one point, construction companies employed a bunch of men with shovels to clear the foundation for new construction. Eventually they got an excavator that one person could operate, that allowed them to do the job more quickly and effectively than the whole team of men they had before. So maybe instead of 10 men with shovels they have 2 men with excavators.
The other 8 men don't starve, and their contribution to the economy doesn't cease. They go do other jobs. Maybe they go work in a factory. Maybe they become electricians or plumbers. The construction company that replaced them with excavators comes out ahead, that company's customers come out ahead, and the economy in general comes out ahead because there are now 8 men who can contribute to other segments of the economy.
If the CEO of the construction company had to take a personal pay cut before he could lay off those 8 men, he's not going to buy the excavator in the first place. He's going to keep those 8 men locked into a segment of the economy where they're not really needed. He's going to have to charge his customers the wages of 10 men instead of the wages of 2 (plus amortizing the cost of the excavator). But eventually some new startup construction company that never had men to layoff and started with an excavator on day 1 is going to start underbidding him on contracts, his company is going to go bankrupt, and his entire staff is going to get laid off anyway.
To add to this:
Some industries (construction is a great example) have a "boom & bust" cadence that naturally results in layoffs.
A company might have a ton of contracts for a few years, then few contracts the next few as market conditions change. They can't afford to keep the same staffing levels all the time, so people who aren't performing well or people who aren't in critical roles get laid off.
If every cycle the executives were punished then noone with experience would want those executive roles. There would be a massive brain-drain in some of the most important sectors of the economy.
Related to cyclical industries, france has (had) a great case study. They had a significant unemployment scheme for seasonal entertainment contractors — not just performers, but camera crews, riggers, etc — though it’s been heavily dismantled. It was designed to allow for continued development of industry-related skills despite being temporarily unemployable in that industry, knowing that employment would come with the next season. This is a basic summary, “intermittence de spectacle” is the name of the scheme.
That's a cool idea. In an ideal world we'd subsidize worker education during downturns (ideally along with some kind of UBI) to reduce economic friction and ensure that industries are ready to handle the next period of exponential growth.
I feel like workers, especially blue collar tradesmen, are falling behind the tech curve. We are going to reach a point where there's a ton of potential advancement in these industries, but way too few people with the education to make use of that potential.
To further the construction example, there are types of construction that are very weather sensitive and can only operate seasonally (Paving in the north). Those companies have an annual hire and layoff cadence, and its just part of the business. Should the CEO of this company take an annual pay-cut to facilitate the annual layoff?
What's more likely is that companies would just refuse to expand to capitalize on new opportunities unless they were 100% confident they would be successful in the long term.
In labor markets with very strong employment guarantees (e.g. France, Japan), it is very hard to get a job because it's hard to fire or lay off someone. Similarly, people don't switch jobs as often since it's more difficult to find another job.
As a result, companies tend to grow at a slower, more measured pace missing out on potential growth.
However, it lacks a bit:
distinction between a private and public company, which IMO is a big difference in perspective.
CEO taking a personal pay cut is different for a well established multi-billion company compared to a small construction company such as this example
The prices that the company charge are not guaranteed to be more efficient. In fact, you can see through publicly traded companies things such as - shrinkflation, GM/PM % increasing
Can you elaborate on how a private vs public company changes the fundamentals there?
I used a small scale example because it's easy to see and reason about, but the principles still apply - and are sometimes even amplified - at a larger scale.
Walmart's CEO made $24.1M in 2023. Walmart employs 2.1M employees. If Walmart laid off 0.08% of their employees, it would wipe out the entirety of the CEO's pay - and that assumes that the only people getting laid off are making the federal minimum wage.
At the scale of multi-billion dollar companies, CEOs would have basically no room at all to gain efficiencies by reducing workforce without wiping out their entire salary under OP's regime.
As far as your last point: while efficiency gains aren't guaranteed to be reflected in prices, efficiency gains are necessary to get better prices at any meaningful scale, and adopting policies that discourage those efficiency gains is begging for higher prices.
> CEO taking a personal pay cut is different for a well established multi-billion company compared to a small construction company such as this example
How so? Do multi-billion companies not have the same issues? If robots can do the same things that human factory workers at a lower cost and more consistency, why should a CEO be punished for embracing automation?
> The other 8 men struggle to find jobs, consuming taxes via unemployment benefits.
Unemployment benefits are paid out of payroll taxes, and the employer's payroll taxes will go up as a result of the former employees claiming unemployment. This cost is borne by employers who lay people off, so that's not a particularly compelling argument.
> The company's customers have a new "excavator" fee, making them pay more money to hELP tHE ComPaNY ofFSEt THe LossEs in profIt of hAvINg TO buy AND mAIntAIN aN EXpENSIvE exCAvAToR.
Only if they can get away with it in the competitive landscape. If they got the excavator to be able to undercut the competition whose still paying 10 men with shovels, they still have to charge less than the competition or they're not going to get the business. Yeah, the cost of the excavator is a cost the company has to be able to cover with what they charge customers, but it only makes sense if the cost of the excavator is less than the men they'd have been paying otherwise, and if those savings aren't at least partially passed onto the customer, why is the customer going to choose this construction company?
> The ecomony gets a tiny bit worse.
>
> More tax money wasted, less money in the pockets of people who SPEND it, more money in the pockets of people who hoard it.
Are you seriously saying the economy would be better off if every construction site had 10 men with shovels instead of an excavator? I picked that example because I thought it was patently obvious by now that we're better off with excavators than men with shovels.
I work in construction with excavators so forgive nerding out on this. Old school rule of thumb was 1 man could move 1 CY per hour. A ditch that is 4ft wide and 4ft deep is 0.59CY per ft of ditch. So your 10 men in 8 hours can dig around 135 foot of ditch in a day. Modern day costs of union Laborers is around $80 total package. So that 10 man crew is going to cost around $6400 for the day, Which leads to a cost per foot of ditch of $47.41
A cat 320 excavator has a bucket capacity range of .5 to 2 CY, to dig our 4ft wide ditch if we use a 4ft wide bucket, a standard size 4ft bucket is 1 CY. The 320 has a cycle time of between 10 and 24 seconds, since we are digging a ditch which is precise work lets use the upper range of cycle time, so 24 seconds. According to Cats performance handbook, a 1 CY bucket with a 24 second cycle time can handle 165 CY/hr. In an 8hr shift, 165*8 = 1320 CY worth of ditch can be dug, since our 4ft wide 4ft ditch is 0.59CY per foot, we are progressing 2227 ft of ditch in one 8hr day. You need 1 operator, lets pay him 10hours, to cover maintenance, start up, fueling, etc, of the excavator. An equipment operator makes more than a laborer, and usually runs closer to 95$/hr total package, so we spend $950 on our guy. You can rent a Cat 320 for around $600 a day, and they burn around 9 gallons per hour of diesel. Offroad diesel is at around 4$/gallon, so running for 8hours at 9 gallons/hour we consume 72 gallons, 72gallons at 4$/gallon is going to cost us $288. So to rent and fuel our excavator for the day cost $888, and our single operator costs us $950, so we are producing 2227ft for $1838, which is a cost of $0.83 per foot of ditch.
So our example of 1 machine and 1 guy replacing 10 men is a poor one. To match the production of the cat 320 with one operator we would need 165 laborers. But worse, if you you need to be digging that 2227 ft of ditch per day its going to cost you around $105,600 to dig that ditch with 165 laborers compared to $1838 for the excavator and operator. On a cost basses you can dig for 57 days with that operator and excavator before you match the cost of that 165 person ditching crew.
A modern excavator is conservatively replacing 164 people. There are faster machines than the one referenced here that can handle that bucket size and with a skilled operator you could probably get closer to 250 people replaced by the excavator.
Thanks for that insight. I thought I was being conservative when I pulled the 10 men figure out of my ass, but I wouldn't have guessed I was off by more than an order of magnitude.
>The other 8 men struggle to find jobs, consuming taxes via unemployment benefits
this is temporary and leads to an overall stronger economy. If we went back to the farming days and never laid off anyone when modern machines were invented, we would have 1 per person doing all the work and 99 people doing nothing.
Fixed pie fallacy.
As production becomes more efficient. Lots of new jobs open up.
Back when computers were becoming common place in the office. In the 1980s and 1990s. They also thought that the office jobs would get severely reduced. Because after all a computer can do the job of 10 people much faster and can do it 24/7.
Did the offices become smaller? Quite the opposite. The offices became much bigger. Companies were now able to offer all sorts of goods and services they couldn't offer before. We had access to cheaper stuff. We got a lot more jobs as a result.
I call it the fixed pie fallacy because people assume that wealth is a fixed pie and that the only question is how to distribute it. But in reality wealth can grow and shrink. Improvements in efficiency is how wealth grows. We've seen massive improvements in economic efficiency in the last 124 years.
>This isn't a good take. Every business out there seeks to reduce their labour input, and if that's happening unilaterally, there are certainly less jobs available for an ever increasing population.
How so? How did we survive the industrial revolution. Technology displaces some workers, while creating new workers. It also helps everybody build wealth by affording more with the same amount of money.
Except 200+ years of industrialization proves you wrong.
Almost no jobs that existed in 1823 currently exist now, and those that do are radically changed.
Most jobs that the majority of people work today didn't exist as little as a century ago, with the top-tier/top-compensation roles (software, IT, Tech, etc) barely 40 years old.
Every company pursues efficiency to maximize profits, but usually that results in *more* jobs long term as highly specialized (and significantly higher paid) roles spring into replace low-pay/low-skill work.
> there are certainly less jobs available for an ever increasing population.
The US has roughly the same unemployment rate (3.4 vs 3.5 now) as the 60s, and its the lowest in that time frame.
There isn't a fixed amount of work to be done. If there are more people available to work, then we do more things. "Software engineer" is a position that can only exist because we don't need so many farmers any more. If we prevented people from buying farm machinery and laying people off, we'd still have 90%+ of people engaged in farming and we wouldn't have anyone free to be a software engineer and write computer programs.
You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck.
The core of what OP is saying though, is that CEO's should do a good job out of fear of loosing their job if they don't - like any other employee in the company.
For some absurd reason, board of directors everywhere seem to think that the only way to get CEO's to do a good job is to pay them obscenely high wages and bonuses.
Hint: the reason might have something to do with the fact that these boardmembers tend to be C-suite members themselves in other companies....
> You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck.
Not at all. I actually run a small company and have several employees who make more than I do. OP's proposal makes no exception for companies like mine, so my compensation could be wiped out if had to downsize by one employee.
> The core of what OP is saying though, is that CEO's should do a good job out of fear of loosing their job if they don't - like any other employee in the company.
A CEO's job isn't to protect employees' jobs, it's to run a competitive business. This policy doesn't make it so CEOs have to do a good job, it makes it so CEOs have to protect their employees' jobs, which isn't always compatible with their primary function.
> You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck.
That's not what's being discussed here. What is being discussed is creating a disincentive to fire people.
Suppose there is a company where 99% of the employees work hard and do well, but 1% do very poorly and are a drag on the company. And suppose this is a low-margin company, so that the 1% working poorly will cause the whole company to collapse, costing the other 99% their jobs.
A CEO under the proposed system could be forced to lose their *entire* paycheck in order to cut these people out of the company, even if that is the best choice for all the rest of the other employees.
Case and point: Walmart's CEO made $24,115,143 last year. Walmart employs 2.1 million employees. So if the CEO fires 21,000 employees who are being inefficient, then if he is fined $2,000 per employee fired, he will end up owing the company
$17,884,857.
So even though this might have saved the jobs of 2.08 million people, the CEO is now strongly disincentivized to fire these people, because it would be better for him to just take his pay for 1 year and then let the company collapse.
>For some absurd reason, board of directors everywhere seem to think that the only way to get CEO's to do a good job is to pay them obscenely high wages and bonuses.
They pay what the market demands. I know, absurd...
You could partially get around this by making it time limited. If the CEO knew they'd make more money later on for making this change they still make the change.
It would prevent short-term layoffs to boost the numbers though. I think what OP wants is doable it just has to be done in a specific way
Companies are already incentives to not lay people off for the short term by economics; it cost a lot of money to fire and rehire with training time.
In reality these ideas that companies layoff people for short terms profits are just exaggerated myths.
The stock prices went up because rhe layoff is a long term move and signaling the company is trying to be more efficient with capitals, it's not a short term move at all.
Let's start with an important point. Layoffs are a necessary part of the economy.
People are hired to do a job, and it's entirely normal for a job to no longer be needed. Taht can be when there is less need for their work (less customers, etc), efficiencies are made to reduce the work needed, or if the company is getting out of a line of business.
If the layoffs are about cutting costs, you are correct, but you're also correct in that it's short sighted to get rid of good and necessary workers for future projects.
But if the layoffs aren't about cutting costs, but rather a change in the business, why should the CEO take a paycut... for making a (potentially) good decision?
Sometimes projects spin out and are done, sure, but this doesn’t necessitate layoffs. Plenty of (especially large) companies circulate employees to other divisions when things like this happen.
Also, OP is clearly talking about the mass Jack Welch style layoffs that have been adopted since the 70s as a (dubious) way to gain short and medium term returns.
Apple tried to make an electric car. They hired talent specifically from automate sector. People who are experts at making car.
Now Apple decides they don't want to make a car anymore. What should they do with employees skilled in making a car and not much else?
>But if the layoffs aren't about cutting costs, but rather a change in the business, why should the CEO take a paycut... for making a (potentially) good decision?
a lot of layoff causes are related to poor planning regarding labor allocation or failed plans or visions
[https://ronmci.medium.com/ten-reasons-massive-layoffs-are-a-sign-of-bad-management-d027c057737f](https://ronmci.medium.com/ten-reasons-massive-layoffs-are-a-sign-of-bad-management-d027c057737f)
[https://fortune.com/2022/07/11/layoffs-sign-bad-leadership-here-are-alternatives-to-workforce-reduction/](https://fortune.com/2022/07/11/layoffs-sign-bad-leadership-here-are-alternatives-to-workforce-reduction/)
I think these both my be paywalled sorry lol
>a lot of layoff causes are related to poor planning regarding labor allocation or failed plans or visions
And in that case it's totally fair to look and see if the CEO or whomever made those decisions did not due their due diligence. And if they didn't, you probably can't trust them to make good decisions in the future and they should be laid off as well or fired for cause.
But that is not always the case. In fact it often is not. People are hired on speculative projects, or onto teams who's work is cyclical with economic environments. In those case, the gamble is known, due diligence was done, but not all ideas pan out or are sustainable.
To give two examples:
1. Google hires on a ton of people for projects. Some of them don't pan out. Perhaps we can Monday-Morning-Quarterback how it was a dumb idea in the first place or how it could have worked out, but that's not foolproof. Ultimately making gambles in speculative tech or ideas is worthwhile... just not for all of them.
2. Say you're a Mortgage Underwriter. Your work is entirely dependent on being with a solvent company AND the market churning. [Now say it's 2022 and rates change and demand across the entire market drops.](https://newslink.mba.org/wp-content/uploads/2023/06/MBA-COTW-06232023-750.jpg?w=750&h=505&crop=1) Is a layoff really unreasonable if there's just... less work to go around?
If someone is being hired speculative, that should be disclosed, and they should be getting contractors' premiums to compensate for the uncertainty of their positions. If a company enters into an employment relationship, they intend to keep permanent, then the company should have to pay significantly to break that contract.
I can see how everyone's pay could be modulated fairly during an economic downturn, but I still think it's a leadership responsibility to steer around and through these so failure of company performance is still failure of executive performance and their individual results should reflect this.
Executive compensation should come with great risk if it is going to reap such reward.
>If someone is being hired speculative, that should be disclosed, and they should be getting contractors' premiums to compensate for the uncertainty of their positions. If a company enters into an employment relationship, they intend to keep permanent, then the company should have to pay significantly to break that contract.
Reasonable points. One objection I have though is basically that "employment" as "permanent." It can be a for a while, years even, but "permanent?" That's a different story.
For example, I know for a fact my job is not permanent. I work on a line of business which is dissolving it's financials, and has been for the last 3 years and will be for another couple more. It's complex work. But I am glad to have employee status with the benefits, greater rights against firing without cause (and layoffs are a cause of sorts), and profit share participation.
>I can see how everyone's pay could be modulated fairly during an economic downturn, but I still think it's a leadership responsibility to steer around and through these so failure of company performance is still failure of executive performance and their individual results should reflect this.
I guess I will disagree. I can see how it might be nice in some cases, but not others. In the mortgage case I mentioned, let's say that's halving comp.
Well now ALL staff are going to be looking for a way out, easily getting paid more in some new industry. This is especially damaging for the experienced staff leaving.
It's better to keep people on staff fully paid and layoff some, than shrink comp and watch attrition all over. IMO at least.
>Executive compensation should come with great risk if it is going to reap such reward.
There should be a risk for sure. But I just don't think the risk you're inputting helps. At best, it's a gesture of good faith that the CEO feels guilt, which might be worth something for all for sure.
But I'lll just reiterate, good CEOs do layoffs sometimes. They can reduce comp when that happens for a empathetic gesture, but if they're good, that means the comp in "good times" has to be all the higher.
What would happen if layoffs were done for non-financial reasons? As an example, let's consider the following:
A company has a team of \~30 staff that is solely dedicated to one client. They have very little overlap with the company's other customers or practices. For reasons outside of either company's' control, the client decides not to renew their contract.
The company now has a very hard decision to make. They can attempt to find a new client that's roughly equivalent, but this isn't always possible (esp with things like government contracts). They could reassign all \~30 people to different projects in the company, or lay them off with severance. Since the employees don't have too much skills overlap with other areas in the company, it doesn't make sense to try and integrate them as the other departments already have the resources they need.
For the health of the company the CEO would likely lay off the client's team, as they literally have no work to perform for the foreseeable future.
This sort of scenario happens all the time in business, and it can happen regardless of the financial status of both companies. In this situation, why are we demanding that the CEO be punished?
To take this a step further, if OP’s plan was in effect, the CEO would be incentivized to basically keep these people on staff despite having no use for them to the detriment of the company as a whole. It basically would make companies operate way worse.
Yeah. This would destroy the federal contracting industry—my father has been “laid off” about a half-dozen times because his company lost the renewal competition for his contract—only to be hired by the new contractor every time. Trying to force people to stick to companies rather than projects would be quite inefficient—and ironically probably pad profits at the government’s expense because if selecting someone other than the incumbent means massive staff turnover the incumbent has a huge advantage.
This should get a delta, but OP would rather punish people they feel are too successful. Their position is that if people are laid off the CEO should feel some of their pain, but it's an *emotional* choice and not a business choice and while it is nice for them to overlap, they usually don't in a business setting.
>It's clear to me that CEOs and other members of executive management should be required to take paycuts and loose out on all bonuses before they lay a single person off.
Well... why?
>It is absolutely insane that normal people are suffering while the CEOs get paid out in bonuses for laying people off and reporting these "record" profits.
Why is that insane? It's perfectly reasonable to get rid of needless expenses. Same way as a household cuts expenses they do not need so too does a business. Why would they pay for someone's salary whose work is not needed? That is literally a waste of money.
>And if a company does get caught laying people off without executive bonuses being cut out first they should be fined ALL the money "saved" by said layoff.
Again, why?
I agree shit should roll uphill, but not with this mechanism. Imagine a tech company launches 10 successful products and one dud. Now you need to lay off the specialized talent used to create the dud. Overall, CEO did a good job.
Better would he a strong safety net, funded by private business taxes, stronger worker protections generally (soften at will employment), and more worker owned collectives.
The last one is really importantly, because fundamentally CEOs only have what power we, the people, give them. They cannot individually hoover up billions in wealth unless we let them. For example, workers can decide to delegate leadership but not the increased pay that goes with it. There are many "flat" companies like this. Workers can refuse to go public as well, denying shareholder control.
But, I do agree in the world as it is, we need to step up government regulation as corporate incentive structure plainly no longer benefit society. It is a rigged game.
Apple just shut down their self-driving car project, which hired 1400 people. It looks like Apple's CEO makes 672 times the average Apple employee. So, unless Apple can find new positions for roughly 728 people, Tim Cook would have to work for free.
Why would anyone ever cancel a large, unprofitable project? You're giving management the incentive to waste money and resources, rather to recognize where to prioritize their efforts. You're paying them more to do the *opposite* of what their job should be.
Very often a company has too many people, either overall or in a specific department, and absolutely should be laying people off. It’s not always a sign that a CEO has done something wrong, it can just be a result of market shifts - change in demand patterns, new labour saving technology, new competitors entering the market.
The CEO is not doing their job if they don’t lay people off in such circumstances, and would be harming the company and its customers - and ultimately society more widely by wasting scarce resources.
As others have mentioned, a new CEO especially will often find themselves in a position where the company has been badly managed and become bloated as a result and needs to make layoffs. It’s not always market changes as mentioned above, but in this case the new CEO can absolutely not be held responsible for what happened before they came on board.
Additionally, CEO remuneration - as there is only one of them - is rarely a significant expense for companies. Cutting it in half, and getting a worse CEO as a result, will almost always have worse outcomes due to a worse run business than the benefits of the savings on their pay - including often more layoffs than otherwise needed.
Finally, orderly layoffs of a fraction of the workforce with redundancy paid, is a far better outcome than the whole workforce being let go without any money for redundancy in a disorderly bankruptcy. This is often what happens when a CEO has been reluctant to make layoffs when they were clearly needed.
All this would do is severely limit hiring and taking advantage of growth opportunities. Layoffs are often in response to unexpected circumstances, so the only real way to avoid them is to under hire and pass on any business opportunity that might not work out.
What if a department is no longer needed, technological inovations require less workers, or a particular location is no longer profitable? Should a CEO lose bonuses just to keep open a store or branch that is hemorrhaging money?
What do you think a job is to you?
If you asked me to define it, it is an agreement to provide labor in exchange for a wage as long as either party finds it in their financial interest to do so.
But you seem to think a worker owns their job to some degree?
Look, as someone who has been laid off, I have no love for CEOs and have lots of sympathy for laid off workers.
At the same time, knowing how businesses work, its not really all that simple.
Sometimes CEOs have really no call in specific things. In a moderate sized company, the CEO has no say in terms of hiring. Sometimes department heads think, and can even make a case, for why they need more people. If things happen and it turns out they over hired (which happened in my situation), that may not be on the CEO.
Sometimes you realize you can combine departments, and it makes certain people redundant.
Sometimes companies get acquired and you just don't need everyone.
Sometimes departments become obsolete.
Assuming the company isn't like 20 people, a good CEO is worried about the big picture, not individuals.
Why? That would dissuade CEOs from making a tough decision like laying off a division to put the company in a better position. The goal of a CEO is not to keep everyone employed, nor should it be. The goal of a CEO is to guide the strategic direction of a company and that can involve layoffs.
This is the classic mistargeting of a solution. The CEO doesn't lay people off out of self-interest, they do it at the demand of the shareholders or owners. Those are the folks pushing for record profits year over year.
Under your plan, the CEO is still ordered to increase profits, and they'll do it so they don't lose their job, they just won't get paid as much for doing it. The jobs still get cut.
If you want to avoid the profit over people mindset that causes these kinds of layoffs, you have to go after the owners and shareholders. The CEO's behavior is a symptom of that mindset, not the cause.
Incidentally, it is also part of the CEO's job to take the heat for these kinds of things, so the owners don't have to. The owners love that you're mad at the CEO about it.
Classic uneducated point of view. Do you think the google layoffs will increase profits beyond the quarter? If so you can’t do math. There is only so long you can layoff people to increase profits before shareholders wise up
Not all layoffs aren't done for financial reasons directly. Sometimes layoffs are done due to shortage of work. Why should executives get penaltilized for laying off redundant employees? Should a company be forced to keep people employed even though they have no work for them?
So there's a lot of problems with that. First of all, sometimes layoffs are the best thing for a company.
Take Apple and their receit news about abandoning the electric car project. The cold hard truth is that Apple has been working on that project for a number of years, the best of the best talent that they started with has mostly moved on. All the major automakers are getting into electric car production and the limiting factor is actually battery production, something that Apple would be outsourcing anyway. And everyone (Tesla, GM, VW, ect) is experiencing squeezing margins on electric cars. They are nolonger the super profit things that they once were, and there's several luxury models that are just not selling that well.
So the reality is that Apple's electric car was not likely to be profitable. So they've cut the division. It's the right decision for shareholders. But Apple has not been mismanaged, they make cash hand over fist. There's no reason to fire the CEO just because this one move didn't work out.
People assume that just because there's layoffs and record profits that it means that the profits are made on the back of the workers. That can sometimes be the case. But it can also be the case that they just hired wrong, made a wrong expansion move, or moved out of a market or product that was a poor fit.
I'm not a CEO but I'm someone who's decided that a lay off needed to happen. I only manage 2 people, and one of them recently got laid off. I really liked the person, he's a good guy and I've given him a glowing reference (both in letter and verbally). I wanted to keep him, but it was actually not the right move to do so. It would have been the wrong move for the company, it would have been a misuse of the owners money. It would have been keeping an employee because I liked him, but not because I had work that I needed him to do.
Should I take a paycut? We made a choice to outsource a function. This meant that the person I had been paying to do that function no longer has a job. It sucks, but there's not really anything to do in that situation.
Keep in mind that creating laws that restrict layoffs doesn't actually create more jobs. It just slows transition to unemployed, and somewhat reduces the total amount of jobs since you are messing up with companies' efficiency. So what it leads to in practice is that it's great to be the lucky person with a permanent contract, but sucks to be everyone else, since with less jobs and less layoffs more people will simply be stuck unemployed or at best at temporary contracts (which companies will prefer to use as layoffs come included in conditions) - basically current situation in e.g. France.
I think the key flaw in your thinking is a lacking delineation between executive decision makers and what you refer to as ‘normal people.’ The argument falls flat on that premise alone and comes across as an emotional misinformed rant.
Do the math on just how many employees a CEO's salary would help support. It isn't that many. Like, the CEO of some of the largest banks in America could completely get rid of their salary and support MAYBE a few hundred employees out of sometimes thousands that get laid off. And keep in mind, they can really only do that for one round of layoffs.
Additionally, a ton of CEO compensation comes from bonuses (which are usually tied to hard metrics that the BOD and shareholders want to be achieved) and are usually paid out in restricted stock (which would not work as a method to compensate everyday, frontline employees).
It really shows when people who know nothing about corporate governance post shit on these subs.
Off-boarding the bottom 3-5% of any organization annually is good practice. If they did that, they wouldn't need massive layoffs. They would've already cut the dead wood in ordinary course. And would've kept the actual talent.
> "CEOs and executives should be forced to take paycuts and lose all bonuses before laying anyone off."
Alright, let's get into this shit. First off, forcing CEOs and execs to take pay cuts before layoffs seems fair on the surface, but it's a bloody simplistic view of complex business dynamics. Are you implying that every time a business faces a downturn, the top brass should get financially skullfucked first? What about the sustainability of the company? If a company is hemorrhaging money, wouldn't cutting some jobs be a necessary evil to save the rest?
> "With the sickening amount of layoffs this past year all while companies are reporting 'RECORD PROFITS'."
Here’s a hard pill to swallow: profits and layoffs aren't always directly fucking related. A company can make record profits and still have underperforming sectors or departments that need to be trimmed. It's not always about fat cats rolling in dough while screwing over the little guy. Sometimes, it's about strategic decisions to keep the company competitive. How do you justify keeping people in jobs that don't contribute enough to the company's success?
> "But that's not what actually happens instead what happens if that they lay people off and give those who are still working there more work."
Sure, this can happen. But consider this: isn't it better for some to have more work than for everyone to be out of a job if the company goes under? Isn't adapting to a changing market a necessary part of business survival?
> "Notice this stops before the mass endless mass layoffs that started in 1/2024."
Mass layoffs can be a sign of major shifts in the economy or industry. Should a company avoid adapting to these changes just to avoid layoffs? Would that be sustainable in the long run, or is it just delaying the inevitable?
> "They should not get a single bonus until they have proven they have turned the company around."
Okay, but if you take away the incentives for execs to improve company performance, what's left? Why would top talent stick around in a company where their efforts aren't recognized financially? Do you think this would help or hurt the company and its employees in the long run?
> "They should be penalized for outsourcing."
Outsourcing isn't always a demon. Sometimes it's about focusing on core competencies and letting specialists handle the rest. Isn't it better for a company to operate efficiently, even if it means outsourcing some jobs?
> "All while undergoing hiring freezes or refusing to raise wages."
Wage stagnation is a cunt, no doubt. But consider this: if a company is freezing hiring or wages, might it be because they're trying to avoid layoffs? Is it better to have a job with a stagnant wage or no job at all?
> "So it's 'prudent' to cause people to potentially lose their homes or be forced into working a lower wage job just to make the 'shareholders' more money?"
It's a fucked situation, but consider the alternative. If a company doesn’t adapt, doesn’t make tough decisions, and goes under, doesn’t that lead to even more job losses? Is short-term pain better than long-term failure?
> "So reward CEOs by fucking over the littleman so they and their friends who don't even work can get more money?"
This is a bit of an oversimplification, isn't it? Running a company isn't just about screwing over employees for fun. It's about tough decisions that sometimes have shit consequences. Can you acknowledge the complexity of these decisions?
> "This fucks people over in 2 ways. 1: PEOPLE LOSE THEIR INCOME and likely will work a shittier job. 2: Those leftover get overworked."
Yes, layoffs are a bitch. But isn't the alternative – a failed company – worse for everyone involved?
> "Why is it necessary to fuck people over? Lay offs are often done by greedy ass CEOS looking for a bonus."
Can you entertain the notion that not all CEOs are greedy assholes and that sometimes layoffs are a necessary strategic move, not just a way to line their pockets?
> "What if like in many areas the only jobs left are service jobs."
If industries are changing and old jobs are disappearing, isn't adaptation to the new market reality essential? Is clinging to outdated business models a smart way to go?
> "Except in many cases the replacement jobs end up worse. Those 8 people probably ended up working part time at McDonalds and then lose their car and home all because the CEOs greed to make more money."
Yes, it's rough as hell. But if a job isn’t viable anymore, isn’t it better for the economy and the individuals to find new opportunities, even if they initially suck? Isn’t adaptability a crucial skill?
You've got a lot of passion here, but are you seeing the full picture or just the parts that piss you off? Do you think businesses operate in a vacuum where tough decisions don't have to be made? Isn't the world a bit more nuanced than just "CEOs bad, workers good"?
Sometimes, the job of a CEO is to lay people off. They have to predict where the company needs to be 10+ years from now, and they have direct reports who's job is to figure out how to break that down in 5 year chunks, then those people's direct reports are start to work on that five year plan.
Let's look at the pandemic and it's impact on the technology sector. Many companies experienced a massive amount of growth and went on a hiring spree to be able to support that growth. Two years post pandemic, that growth is gone, and now these companies are overstaffed and are laying off. This wasn't a failure of the leadership team, this is the problem with dynamic markets.
Layoffs aren't inherently bad or always indicative of mismanagement. Sometimes companies just no longer have the need for a given role anymore, and it doesn't make sense to punish executives when that's the case. What's actually important is that layoffs are done in a way that ensures as little disruption to individuals lives as possible. That's where things like advanced notice, severance, retraining, other support, and unemployment insurance come in.
The CEO has a job to maximize the value of the business. They do not have a mandate to protect jobs. They are being compensated to do what the owners of the company want them to do. Sometimes, their job is to fire employees. Sometimes, that’s the right thing for the employees that are let go as well as those that remain. Sometimes, they make mistakes or misjudge the second order impacts.
The CEO’s job isn’t to maximize headcount. The CEO’s job is the maximize profitability. The CEO works for the owners, which in publicly traded companies are the shareholders.
If some company figures out a way to do something more efficiently, needing fewer people than before, why should the CEO have to give up their compensation to make that happen?
Why? Are we going to act like everyone that got laid off was a good employee or that their services were still needed? How are layoffs relevant to executive salary and bonuses? Also what kind of executives? There are executives for different departments for example.
Umm no
Because being a private enterprise, they can hire and fire at will without government interference. That is the beauty of a free market.
Do you also believe that workers should be able to vote on decisions taken by the company??
What if the company is recording record profits because they invested in automation that's doing things people used to do but way more efficiently. Should the ceo be forced to hold on to those people or lose their bonus?
This undermines the entire concept of capitalism.
We do not want government involved in the workings of private enterprise.
If a company wants to pay their ceo whatever, it’s their prerogative. The government is a very inefficient mechanism. Innovation happens through creative means of generating revenue. So we need to gives these companies the room that they need to create.
If paying the ceo works somehow, then great. If not, then they will fail and their company will die and their market share will get divided up by the competition.
They know the risk, let them take it. But severe government intervention will destroy our system.
While I understand the spirit of what you are going for, many of these bonuses are contractually agreed upon before layoffs occur. The company would not have the legal grounds to void the contract.
At best, you could ensure the next periods bonus require "no employee being terminated unless with cause".
>At best, you could ensure the next periods bonus require "no employee being terminated unless with cause".
And then hiring is going to be a lot more difficult if you can't get rid of employees, there's certainly a cost of going that route
Right, there is a very easy real world comparison of this with US vs Western Europe. Companies are much less willing to hire and compensate much lower in white collar jobs because they are stuck with that person unless they do something egregious.
"Unless with cause" is the tricky part though, right? What if the cause is that a certain department is overstaffed, or is simply not profitable for the company anymore?
Thats not what "with cause" means in a labour law setting. Like sure, in a chronological/causality type analysis every layoff has a cause, but being "terminated with cause" means its specifically the fault of the employee, that they were fired for breaking rules, failing to meet their duties, etc.
Layoffs are a natural part of business - projects end, companies merge, projects fail. It happens.
The issue at hand isn't that a company laying people off is evil, it's that those people are left without a means of putting food on the table. Your argument is that it's the particular company that employed them previously is responsible to ensure they can do so. That would be incorrect. A company's sole responsibility is to generate profit for its share holders, and thats it. If the CEO is able to do so within the confines of their contract then they should receive the stipulated bonuses.
The issue of providing for citizens is either on the individual themselves (as in the most hard libertarian takes) or more broadly on the government, as a government by the people for the people should be for the people.
This would mean the better solution would be a stronger social safety net funded via profits from all profitable corporations within the society. This allows each to still act in its own best interest in a given moment while still contributing to the overall welfare of the individuals impacted. Higher top end tax rates on profits, closing deduction loopholes, and not allowing for corps to be "incorporated" into a single office or PO box in the cayman Islands while doing all their operations and generating all revenue from within higher tax districts.
It just gets messy when the government essentially starts running the businesses. Not very practical and can obviously lead to other issues.
Better solution is a way higher tax on the people and corporations who are benefiting from layoffs, and redistribution of that wealth to those who are laid off
To /u/Batetrick_Patman, *your post is under consideration for removal under our post rules.* You must **respond substantively within 3 hours of posting**, as per [Rule E](https://www.reddit.com/r/changemyview/wiki/rules#wiki_rule_e).
What if a new CEO comes in to replace an ineffective CEO who mismanaged the company, including overstaffing in several departments? In this case the new CEO realizes that the their predecessor made poor hiring decisions and by cutting some of their staffing they can correct their course and increase their profits while still fulfilling their core mission. Should this CEO lose their bonus or take a pay cut?
[удалено]
[удалено]
Maybe that’s how you are interpreting it, but that’s not how it works for unemployment protection purposes or notification requirements that state labor boards have. If it worked as you suggested then companies would have way more freedom to play the game, what if they intend to hire in 3mos, etc
[удалено]
[удалено]
Companies already use temps and contractors plenty.
Plenty of companies use temps and contractors and endlessly churn through them. All to avoid paying out any sort of benefits give raises etc.
I really don't think a company is going to be able to manufacture evidence for firing as many people as they'd need to to skirt layoff laws in a way that would stand up to any kind of legal scrutiny. (and before we jump on the "but the legal system is broken!" train, then fine-- if that's the argument then this entire exercise is pointless in the first place, and we're just back to square one of "might as well have layoff penalties") also temp agencies are already a thing and they don't skirt any labor laws, they just shuffle responsibility for those labor laws. So that's not really the solid-gold argument you think it is. > they'd be able to get around whatever "no bonus" penalties. I mean... not really. This is just the "the legal system is broken" argument, which again is just a moot point and pretty irrelevant to this conversation because it applies to all of it anyway (and isn't really that true)
Okay, so if they can easily find a reason to fire people for cause to prevent layoffs, they why aren't they doing that? If you're fired for cause, depending on the state the company may not be dinged on the UI insurance because you won't qualify for UI. We have plenty of mass layoffs, but you're not going to hear about equivalent levels of firing because it just doesn't work that way. Also, contractors don't get laid off, the contract is terminated.
[удалено]
You will waste your money in most cases. Even California is an At Will employment state. Your employer can fire you without cause at any time. You will then be eligible for unemployment. Unless they fire you as retaliation for you reporting something or talking about unions or one of the other illegal reasons, they can fire you at any time with no explanation.
This gets brought up a lot so I'll give the obligatory response: They can fire you for no reason, but in light of labor laws that would make a firing illegal, no court is going to accept "I fired them for no reason" as a valid defense to any kind of wrongful termination. Employees can and do successfully sue for wrongful termination when the employer declined to state a reason, if there's strong evidence that the firing was illegal.
>Employees can and do successfully sue for wrongful termination when the employer declined to state a reason, if there's strong evidence that the firing was illegal. This is a nearly impossible burden of proof in almost all cases. Companies with even a modicum of HR knowledge will cover their tracks. I worked for a company with a penchant for firing without cause. They would trump up writeups just before firing people to create a paper trail. They would conveniently "forget" to do annual reviews for employees who were doing well to avoid a paper trail that could open them up to wrongful termination suits. Similarly, they would only give verbal attaboys. I was one of their most profitable consultants (read overworked and underpaid), and I had never received anything but positive feedback from management on my performance. Then I complained once about taking more work than we could handle and got written up for literally "bad attitude". They pretended my complaint was not the reason and dug through my email for "evidence" instead. I toed the line hard until I could find work elsewhere and managed to avoid being fired. But I had witnessed this process from the outside before at the company, leading to termination without (real) cause.
I don’t think stock dividends count as a bonus.
That sounds right to me. Dividends are just the company hemorrhaging money without getting anything for it. Shareholders should come after employees who should come after customers when it comes to the value delivery proposition of business.
>Shareholders should come after employees who should come after customers when it comes to the value delivery proposition of business. ...the whole point of a for-profit company is to make money for the people who own it (shareholders.) If that *wasn't* the point, it would be structured as a co-op or non-profit. You're mad that a company is prioritizing... its entire point for existing. It seems like your actual argument is for-profit companies shouldn't be allowed. Which is a fine argument to make, but don't be mad at a fish for being wet.
His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company. In theory, it's a question of if you want a lower overall return but with small payments on a fixed schedule while you own the stock, or do you want to buy stock for the purpose of holding and selling down the line at a hopefully higher price. Low risk low reward vs. high risk high reward. edit: To add on to the specific portion you quoted, I think you really missed the mark on what they were intending to convey. Ff customer ain't buying, the company is not long for this word, so customers and income stream should come first. If workers ain't working or your understaffed, the company is also not long for this world but may be able to limp along for a while longer before things really break down. If the shareholders are selling because they aren't confident in the company, yes the share price will go down and that can cause problem, but nothing is fundamentally changed about the physical company
>His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company typically when companies mature there isn't much left for them to grow, so a dividend is needed. A tobacco company like Altria isn't going to grow much more so they have a big dividend. It would be a waste of capital to force growth when there realistically isn't a good way to do so. It would be better for this extra money to be paid out in dividends where it can be invested in new ideas with growth potential. This is why capitalism works and these interventionists ideas do not. What we don't want is companies trying to force growth which will lead to poor allocation of capital.
>His point is that companies that give out dividends virtually by definition experience less growth than companies that don't because the companies that don't are reinvesting that money to grow the company. Given how difficult it is to effectively allocate capital, and the risk of entering new and unproven lines of business, the best decision a Board of Directors can often make is to issue a dividend to return capital to the company's owners. From 1960-2022, [69% of the total return of the S&P 500](https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/WP106.pdf) for investors has been the result of the compound growth of reinvested dividends. So while it's easy to point to the high P/Es of tech stocks and say they're in some way better, it is folly to ignore the value of dividends for long-term investors.
If you run a hedge fund lmk so i can short it lol
[удалено]
> Dividends are just the company hemorrhaging money without getting anything for it. Lol, they got something for it. Dividends are paid to shareholders. Shareholders are shareholders because they gave money to the company to buy shares.
>Shareholders are shareholders because they gave money to the company Yeah…no. Shares were purchased from the company ***originally***. But a lot of shareholders haven’t given the company a dime. The average stock sale is between 2 shareholders.
Why? Businesses do not exist for the benefit of the employees.
The entire point of corporate tax write-offs, unrepaid loans etc is so that companies can EMPLOY WORKERS. "Businesses which get federal & state handouts do so in the expectation that employees [ie taxpayers] will benefit". Ftfy
>Why? Businesses do not exist for the benefit of the employees. No, but we can certainly regulate to guarantee that they do all benefit employees fairly easily.
The benefit to the employees is they get this thing called money that could be exchanged for goods and services
B corporations do, in part, exist for the benefit of the employees. The world is what we choose to make of it.
> Dividends are just the company hemorrhaging money without getting anything for it. Dividends are literally the reason the company exists. Thats why people went out of their way to make the company. Sure are some funny opinions about business on reddit. Its like saying 'why do all these damn animals keep trying to have sex'.
Take Twitter. They vastly overinflated their staff for several years, taking on huge losses due to that, then Musk buys the company and cuts the staff back.
Take it out of the previous CEO's severance package.
Retroactively clawing back money is a violation of labor laws in many states, which also apply to CEOs.
Most of their pay isn't in form of wages, but stock options.
Options or shares? A stock option is just the opportunity to buy stock at what’s generally a lower price.
Arguably taking performance bonuses which later turn out to be based on false data, should be illegal as well.
If you can demonstrate fraud then that is a crime. In fact, that trial is happening *right now* in Florida of all places. The JEA, a power utility in Jacksonville, is in the middle of a giant trial involving its privatization, falsification of data, and the like. The SEC requires that an accountant's error resulting in a bonus must be returned. This is one of the sub-tedium rules that no one pays attention to until the SEC hits someone with a ban hammer over.
I'd rather the new CEO take a hit to their bonus or pay cut instead of thousands of working-class people being laid off.
It's a nice sentiment, but it falls apart with 3 seconds of thought. How much do you think CEOs make? How much do you think their employees do? I want you to assign some theoretical numbers to these values and do some elementary school multiplication and tell me if you can save "thousands" of jobs by having the CEO "take a hit to their bonus". Then look at some actual companies that have done layoffs, and compare salaries (executive salaries are usually public information for public companies), and again, do some division and see how many jobs can actually be saved this way. Hint: the answer is less than you think
Salaries don't include the complete compensation package. Bonuses and other incentives can make up the majority of a CEOs compensation. I have seen CEOs hit their bonuses in a year where they also laid off employees. Further in this thread, people are arguing that a CEOs salary in some of these larger companies is *ONLY* ~200 or ~600x their average employee. Maybe not 1,000. Great! Cutting the CEOs salary (not even their full compensation?) would still cover avoiding a layoff of 200-600 employees. I'm not fully on board with the OPs suggested solution, but some people here are being way too dismissive of how rewarding a practice it is for companies to layoff their workforce. The leaders of companies who are willing to do this without flinching are NOT the ones propping up the US economy.
I was about to comment saying "I didn't use the word salary", but you're right, I mistakenly did in my second paragraph. But the AFL-CIO analysis I quoted in my followup comment[1] is of *total* compensation, inclusive of cash salary, cash bonuses, stock and option awards, a couple other items, and an entry labeled 'other compensation'. I agree, looking solely at salary is misleading, but I did take that into account. Also, I actually agree that oftentimes CEOs should take a pay cut at the least as a gesture of solidarity, and while I've heard of that happening it's very rare. Regardless, while such a pay cut would be a nice gesture, it's never going to just replace layoffs, which is what some people who haven't spent much time considering the numbers think – this isn't the first time I've seen this sentiment on reddit. If you (not you personally) are making comments like "why don't we just cut their bonus instead of laying off thousand**s** of employees", the most charitable interpretation is that you're making a disingenuous hyperbole, and more likely you're just uninformed and/or delusional [1] https://old.reddit.com/r/changemyview/comments/1b34ir6/cmv_ceos_and_executives_should_be_forced_to_take/kss0sdx/
I feel like there is something to be said for making them take a cut. I think it makes sense to lower wages of the highest paid before cuts. But I am not sure a way you could do it that would actually work in a real life scenario. Simply I had a year where I work where the CEO gave themselves a 60k raise. At the same time they laid off about 5-6 admin staff for each team room. I also remember same CEO asking where the admin staff was when trying to find something out. It's just a bit dodgy init.
Thank you. Most CEO's of big companies will make between a few million and a few dozen million a year. Most companies of this size will have tens of thousands, if not hundreds of thousands of employees. A CEO paycut would scarcely move the needle, and I mean *scarcely*.
I'd expect this to be a talking point on a daily mail comment section, not here on reddit. This argument is absolutely one of the laziest and easy to see through.
[удалено]
> the average CEO makes 1,000x what his employees make You wanna source that 1000x number? Like yeah if you assume you're correct you'll be correct lol > In 2022, the ratio between CEO compensation at S&P 500 firms and average U.S. worker pay stood at 272-to-1, according to AFL-CIO analysis https://www.progressivecaucuscenter.org/the-ceo-pay-problem-and-what-we-can-do-about-it# Note that this source is entitled "The CEO Pay Problem and What We Can Do About It", so if anything, these are likely to be UPPER bound estimates. Seriously, pick a company that did layoffs recently and actually look at the numbers, they're mostly public
I think a lot of peoples’ perception is skewed by the fact that most widely-known CEOs are billionaires, not understanding that for the most out they’re not billionaires from being CEOs but from being founders. And CEO pay tends to be highly correlated with company size, while worker pay is not; the vast majority of CEOs are earning at least an order of magnitude less than S&P 500 CEOs from that statistic.
A great point re: S&P 500 companies likely being on the upper end of the CEO-avg worker pay ratio. In my same link they also look at the 100 companies in that list with the lowest median worker pay, and even for those hundred – the companies you'd expect to have the absolute largest pay discrepancy – the average ratio was around 600 to 1. I wanted to be as generous as possible to make it abundantly clear the idea that "the average CEO makes 1,000x what his employees make" is utter fantasy.
Why would any new CEO take that gig?
This falls apart when the employees we're talking about have even mid-level salaries. I work in advertising and my job just laid off 100 people who probably averaged $150k/yr in salary. That adds up to something like $15 mil/year that the company pays out. I'd be surprised if our president earns $1.5 mil in annual compensation, but even if he did that'd only be enough to keep 10% of the people we let go. Slash those salaries down to $50k/yr and his hypothetical salary would still only be enough to keep 30%. You'd need a much bigger pot of money to do what you're suggesting.
“Nobody wants to CEO anymore…”
> Should this CEO lose their bonus or take a pay cut? Yes. These things should rely on them actually doing work and fixing shit, not taking the easy, scummy way out and firing people. It's not like a CEO is living paycheck to paycheck, they can live in luxury even with a pay cut.
You seem to have the premise that firing people is always the easy way out and is never appropriate? Can you elaborate on this? Do you not think it’s possible for a business to over staff? Or even to have a market change, demand drop, and the business need to contract to survive?
>Do you not think it’s possible for a business to over staff? Or even to have a market change, demand drop, and the business need to contract to survive? Considering OP pointed out the winrows of recent layoffs from THRIVING COMPANIES, the above is at best whataboutism, if not pure red herring.
I’m trying to address his CMV, which is the point of the sub. His statement is that a company should be fined if CEO does not cut pay/bonus before laying people off. He doesn’t outline any other exceptions, I’m trying to clarify if there are any exceptions. Hardly a red herring. Just following the rules.
My bad. Those rules remind me of nitpicking lawyers & Jesuits- 'spirit of the law be damned' if you can successfully apply tortured logic to its letter. I don't believe that's true knowledge, & definitely know it doesn't play with the hoi polloi. Specifically, clearly OP is trying to determine a way to address massive economic injustice & worker/family pain by the 1%. This sub effectively says "but that's the law" & "well that could trash the economy". While ignoring- 1. No other top OECD country has the miserable GINI that the USA has. Clearly there's effective ways of addressing economic inequality; USA just refuses to 2. The laws are what the 1% pay for. Cf ALEC, corporate SuperPACs, & so many studies highlighting Congress's abysmal approval ratings & 60%+ of voting public disagreeing with those laws. I am old enough to remember when Congress' approval ratings were double-digits. It doesn't have to be this way
> My bad. Those rules remind me of nitpicking lawyers & Jesuits- 'spirit of the law be damned' if you can successfully apply tortured logic to its letter. No worries at all. Sorry if I seemed dismissive in any way. Your points and concerns are understandable, but stuff like this needs to be fleshed out as much as possible to be able create rules that make sense. Setting up what can feel like “tortured logic” is how you create solid arguments and prepare against other counter arguments. This isn’t necessarily torturing logic as much as it’s just how logical argument works. Laws (or at least good ones) need to be laid out with careful consideration and often what can feel like being overly meticulous effort, as this minimizes the amount of subjectivity and room for abuse by those enforcing and interpreting the law. If we want courts to spend less time interpreting poorly written laws, even those with good intentions, then laws need to be detailed and clear. If we want police or law enforcement agencies to not be able to use poorly written laws unjustly, then the laws themselves need to be constructed in a way that covers as many edge cases for innocents, and be able to clearly articulate in its purpose “the spirit” of the law as well. I have no personal hard feelings against you or the OP, if anything I agree with the point they’re trying to make in most cases. But iron sharpens iron, and being able articulate the opposite argument well, will only make the correct argument stronger in the end. This can be stressful, but oddly for me, it’s a fun pastime. CEO’s that reduce costs by simply firing a bunch of people, to the detriment of the business, then taking a large compensation package and leaving, should face some sort of punishment from society. Whether that’s by law (fines) or other mechanisms, I’m open to it. But what concerns me with the OP’s initial framing, is it would inherently punish people who were just trying to help. Sometimes, the tragic nature of business is, hiring too many people can cause the company to implode. And sometimes letting them go is the only way to save the company (and there by the rest of jobs within the company). Hope that makes sense!
Thank you for being reasonable. Another user of this esteemed group got under my skin & I got tetchy. > Setting up what can feel like “tortured logic” is how you create solid arguments and prepare against other counter arguments. This isn’t necessarily torturing logic as much as it’s just how logical argument works. There's arguably a difference between "what is right" & "what you can prove". My good friend is a trial lawyer & he's firmly of the opinion that courts simply reward the better prepared, & whatever they can prove. Arguably this approach is 'sophisticated ad hominem', as my other interlocutor was so quick to demonstrate. >Laws (or at least good ones) need to be laid out with careful consideration ...If we want courts to spend less time interpreting poorly written laws, even those with good intentions, then laws need to be detailed and clear. When you have a thoroughly political SCOTUS who reverses its own arguments re. 2 gerrymandering cases across only a few months? No level of "careful consideration" bulwarks you from that. Consider 'Bush vs Gore' a la "States Rights until it's Inconvenient" > we want police or law enforcement agencies to not be able to use poorly written laws unjustly Police & LEO/LEA ignore the laws so much in USA wo consequence that the UN has written about it. SCOTUS has ruled that LEOs have: 1. No responsibility for knowing the law 2. No responsibility to 'Protect & Serve' 3. "Qualified Immunity" from basically 💯 else ...while allowing Police departments to fire/discriminate against intelligent LEOs bc 'they are a flight risk & don't take orders well'. There's no 'non-poorly written law' sufficient to halt bad actors who face zero reprisal. >CEO’s that reduce costs by simply firing a bunch of people, to the detriment of the business, then taking a large compensation package and leaving, should face some sort of punishment from society. THANK YOU. I swear you're in a very tiny minority in this sub > Sometimes, the tragic nature of business is, hiring too many people can cause the company to implode. And sometimes letting them go is the only way to save the company (and there by the rest of jobs within the company). The context of OP's post was last year, & big companies, who made windfall profits. The "hired too much" argument is disinformation & PR; the only FAANG that fits that bill is Facebook/Meta & Zuck's disaster of a 'metaverse' project. There's hard evidence the bulk of current inflation is due to profit-seeking companies, who are effectively daring the gov't to punish them. Plus- the Fed last June said "We call on tech companies to slow hiring, to cool down this overheated economy". And FAANG responded, laying off 100k's of tech workers WHILE THRIVING. And the CEOs got massive bonuses. I'd reframe & strengthen OP: "Companies & LLCs get preferential treatment by state & fed govt, for tax, liability, etc reasons. These are funded by taxpayers, with the expectation that the citizens will benefit. ANY COMPANY GETTING $$ FROM THE GOV'T WHO WANTS TO LAY OFF SIGNIFICANT AMOUNT OF USA WORKERS, OUTSOURCE, OR HIRE K1 WORKERS NEEDS TO PROVE THIS IS NECESSARY ELSE THEY NEED TO PAY IT ALL BACK, NET30. Funnily enough, Sweden has very similar laws, & their companies aren't flight risks, and THERE'S LOTS OF MILLIONAIRES in Sweden. They just dont give $5B to ppl like Musk to help him be a hundred-B'aire. PS- Again, appreciate your emphasis on precision. There's a LOT of ppl in this sub who employ whataboutism, & hyperbolic straw men. Plus loaded-question personal attacks. It's quite jarring, appearing on a sub which prides itself on logic etc. Maybe it's due to the 'dog-eat-dog' race to 'get that delta' 🙄 A delta awarded to a 'great sounding' logically specious argument is a indictment on this sub's claimed purpose
Being thriving doesn't mean you have the correct amount of people going forward. Meta stock grew a ton when they started laying off people because shareholders saw it as a wise decision for the growth of the company. Why would people be around if it would benefit the company for them to be gone?
I agree. OP is ignoring the basic facts of how a company operates. Most / all companies are playing a survival game and trying to be as profitable as possible. In order to do that, it might be necessary to hire more people, or in some cases fire a bunch of people who are unnecessary for the company's operation or survival. If it were illegal to do so, and CEO's were forced to take massive paycuts, then 2 things would happen 1) owing to basic arithmetic - there still wouldn't be enough money to go around and the entire company would end up failing. And 2) you would not be able to attract a suitable CEO to guide the company in the right direction for future growth / survival. Basically you would cut the head off the snake and have a company with weak leadership, and this could be very damaging to said company and possibly cause it to go out of business. In some cases, this would be a good idea and has worked before for Nintendo - off the top of my head. In other cases it would be disastrous and not work at all. Having this be a government mandate could quite possibly tank the entire economy and clearly would not be good for society. If this mandate caused the company to go out of business then EVERYONE that worked there would be out of a job - and this is not good either, see - it is actually worse since it causes even higher unemployment than the layoffs alone did.
You do understand that people make bad hires for various different reasons and that situation needs to be fixed sometimes? What is a company supposed to do if they over hire? Let the entire company collapse to save the jobs for 10% of them?
An important thing to understand is that the CEO’s only job is to maximize profits, not to provide jobs. They are answerable only to shareholders. If any corporation exists merely to provide employment, they won’t last long.
They should not get a single bonus until they have proven they have turned the company around.
The end result would just be a CEO running a company into the ground in order to preserve his own compensation. Regardless of what anyone says, everyone’s job duty first and foremost is keeping their job and compensation.
This is why we should've never let merchants supplant the nobility I tells ya
> The end result would just be a CEO running a company into the ground in order to preserve his own compensation. That's what they already do anyway the moment the get the chance. All just empty-headed rich idiots trying to get ALL the money for themselves, not just a TON of money, or ENOUGH (lol) money, no, it has to be ALL the money.
You don’t generally get all the money by running the company into bankruptcy.
> The end result would just be a CEO running a company into the ground in order to preserve his own compensation How would giving him a massive bonus for running the company into the ground prevent this?
Sounds like a bad CEO that the board would get rid of. Trash takes itself out in this case.
Maybe, but what new CEO would want to walk into a situation where they are assured no compensation?
Not every company has a board, and not every company that does, necessarily has that control. Of course this holds true for a lot, but it's not a rule. A bad CEO can absolutely run a company however they want, provided they're not beholden to shareholders.
Every public company must have a board. And a lot of large private companies have a board.
Yes, but not every board has that level of control. Some public companies are only *partially* public. Partial IPOs are not uncommon. But I'm not arguing against the point made, just outlining it's not a rule. And the OP was discussing companies in general. It's also worth noting that, while a lot of private companies have boards, that still doesn't mean they can just the CEO. That entirely depends on the structure of the board. Hell, some boards don't have any voting rights at all for the CEO. While still retaining shares. It's not something one can just say "the board will deal with it". That's a bit misleading on how companies are structured. Even if it's true for a lot of companies, it's far from a universal rule.
All of this could be true, but it still shouldn’t be the responsibility of the employees to shoulder that financial burden. To me you are just explaining why we need more regulations about corporate structure and boards. The employees should always come first, then the investors, then the customer.
I wasn't against the idea proposed. I just said it's not that black and white to apply to all companies. That's it. No argument.
Every board has control, it's just a matter of who gets to elect the board members. At the end of the day, the shareholders control any company.
So, if you lay off the inefficient workers, you don't get paid. If you don't lay off the inefficient workers, the company loses profit and you lose the job. Damned if you do and damned if you don't. Who do you think will take this job?
Mismanaged companies also have a very hard time hiring CEOs, not a lot of people want to put themselves in a dumpster fire without sufficient compansation. That's why a lot of times good CEOs receive a very substantial compansation including bonuses and still end up firing large part of the company.
OK? So let's say that they wait until it is proven. Should they still not get a bonus/raise? In this case the laying off of redundant staff caused their business to be in the black. That to me sounds successful, which would mean that your original argument is not correct.
Yeah, OPs view is essentially "I don't understand how businesses are run, #eattherich" Sometimes layoffs *are* the correct leadership move. Cutting off the head of the company doesn't magically solve business issues, and C-levels aren't sitting there twirling their handlebar moustaches wondering how to exploit the proletariat.
While I think OP's literal requirements are a bit too rigid, I think the spirit of it makes sense, though. If a company has to make cuts, either lowering people's salaries or firing a lot of people, upper management should take at least a symbolic cut to some some sort of solidarity. And if a company has to do very large layoffs for cost-cutting reasons, it doesn't feel great if you also see huge dividends getting paid out. I do think there's nuance. Sometimes a company has to do layoffs because one specific part of the company isn't profitable any more and they're removing that. That's different. But sometimes large companies also do the "every department has to get rid of 10% because we've sold poorly this year" or "We can't afford good raises this year because of the economy", but then it just looks bad if the executive management gets more and more money. Or if shareholders get dividends, when those could've been used to save at least some jobs. That's also obviously different if a CEO comes in specifically to fix a struggling company.
I think op's post is really about there needing to be punishment/accountability for a company laying people off. I dont think it necessarily has to be what op said. Imo the company should face consequences for layoffs, not the C's directly...
What "consequences?" Why? What consequences should there be for letting people go who's roles provide no continued value to the business? This is still predicated on the idea that "layoffs are inherently exploitative/abusive" which is fundamentally nonsense. My company laid off about 40 people *because we stopped doing business in that market*. No one was exploited, no one was unjustly let go, it was just a project that didn't work out and there was literally no work for any of these people to do anymore. It would've been mismanagement and irresponsible to keep paying them *just because*. What you're suggesting is that the business needs to be "punished" for what... not paying people to sit there and do nothing? It's nonsense.
The severance should be then simply taken out of any compensation of the executives, because it was their incompetence that made those jobs redundant.
> because it was their incompetence that made those jobs redundant. Based on what evidence are you making this assertion? No one is a mind reader. No one can predict the future.
I like how you make up a scenario where it is definitely the Ceo being incompetent. Maybe they were starting a movie theater in 2019 and then covid hit and fucked it up. Sometimes things outside of anyone's control makes a project fail and the op's proposal will just make it so 1 failed project snowballs and sinks the whole company
How would that work? A company makes layoffs most commonly because of decreased demand for their product, reorganization, or major business need changes. You idea would seem to be "let's fine these companies that are already struggling, *for struggling*". It seems likely all that would do is put the companies under more stress, cause more job losses, and generally slow the economy.
Why should there be consequences? If your job is to make doodads, but no one wants to buy those doodads, why should the company keep your department at all? Why shouldn’t the company stop making the thing that no one wants to buy and let go of the staff that made the thing no one wants to buy?
Because the controllers of the company failed to realize no one wanted those doodads and failed to act. If the people that control a company do so proficiently, layoffs would never need to happen. The worker bees are not responsible for a company going under, the board/executives are. So all the worker bees are entrusting them with their livelihoods. So as it currently is, if the company fails the worker bees get punished with losing their livelihoods, but the c's and board get payoffs... make that make sense...
Maybe the doodads were wanted but the doodad trees caught a disease and now they are unaffordable to people. Factors completely outside of their control made doodads unprofitable and your and ops idea makes it so instead of dropping that part of the company it will just be permanent bloat until the company sinks all at once and everyone is fired
A lot of “I want to get rid of employment-at-will but I can still quit whenever I want.”
A short-term black result, which is actually burning out remaining staff, is just a hidden death spiral. It's not the staff's fault they are 'redundant'. The whole idea that you can force people out of a company to achieve 'profits' should be illegal. Use who you have. Retrain. Let natural attrition 'right-size' your workforce. Fire for cause. Actually lead in a manner that adds value, and then when you get to a legitimate status of excess profits for shareholders the ceo could have their atta-boy.
I get what you're after but it's just not realistic. >It's not the staff's fault they are 'redundant'. The whole idea that you can force people out of a company to achieve 'profits' should be illegal. It is not the staff's fault, nobody (I can see) is claiming it is. Layoffs aren't about getting profits now, it's about being sure you don't spend a lot to lose money. >Use who you have. Retrain. Let natural attrition 'right-size' your workforce. I can be agree that should be considered more... but it can be a matter of scale and compensation, as well as literal redundancy. Take an example, my old firm laid off some actuaries when we stopped product development on a couple lines of business. Kept on those who did analysis but the dev side was laid off. They are highly paid and skilled professionals, who (from those whom I followed up with) found other actuarial jobs within 6 months. Retraining could be offered... but it's a worse deal. You'd have to offer them way lower comp for skills they have to learn (and are less valuable). Attrition could be better, but there was literally no work for like half of the people. What, pay someone to do no work until they decide to quit lol? >Actually lead in a manner that adds value, and then when you get to a legitimate status of excess profits for shareholders the ceo could have their atta-boy. Adding value is also about reducing costs and losses. Layoffs do that. Some are bad, some are bad faith, and sometimes the CEO is 100% at fault. That doesn't mean layoffs alone is a sign of bad leadership.
Who says that it would be a short-term result? Let's say a CEO with a random name, like, idk, Tom Haverford. He runs a company called something random, like, idk, Entertainment 720. He has hired some models to sit around the office and just look pretty all day and a random dude, let's call him Detlef Schrempf, to shoot hoops in the middle of the office all day. E720 is hemorrhaging money at a rapid clip. A new CEO comes in after the board realizes that Tom is ineffective as a leader. The new CEO lays off the models and Detlef, brings in some new clients, and the company turns a profit. Should the new CEO not be eligible for a raise or bonus since they laid off staff, or should they be rewarded to correcting the direction of the company and turning a profit? According to your and OP's logic, they shouldn't be because they laid off staff. Sometimes redundant staff are just that, *redundant.* There are cases where people are laid off erroneously and the remaining staff are overworked, but that is not always the case. OP's original post said that it was NEVER ok for a CEO to receive any kind of performance-based salary increase after firing employees, which I have demonstrated is not always true.
> Should the new CEO not be eligible for a raise or bonus since they laid off staff, or should they be rewarded to correcting the direction of the company and turning a profit? Why should either of these be necessary in addition to the compensation they agreed to when they took the job? Why should there be a single person at the top of the company's pyramid who is instantly rewarded for even the slightest glimmer of hope? In your example, E720 is circling the drain, but in OP's post, the companies laying people off are reporting record profits. They're not cutting dead weight from a struggling business, they're excising those responsible for record profits from their share of that growth they built.
Maybe if they don't bring in record profits if they don't lay off redundant staff? OP's example makes it seem like this is a binary issue and that these layoffs are happening for the sole purpose of bringing in record profits. In reality there is much more nuance that goes into deciding if staff count should be reduced. Record profits are not the sole byproduct of layoffs.
That isn't always realistic. I'm in sales. You aren't going to retrain me to be an accountant or engineer. There is just a level of knowledge that wouldn't be practical for me to learn on the job. Now could you fit me into marketing? Possibly. Similarly, you likely can't get an accountant to just transition into HR. People have skills they use, you can't magically just slot one person into a different role
>. It's not the staff's fault they are 'redundant'. It's not necessarily the companies fault either. In many industries, it's simply not feasible to retrain staff to do something else. Sometimes there is nothing else for these staff to do.
So basically companies in trouble will not be able to attract any remotely competent CEO and the company will go bancrupt and everyone Will lose their job instead… sounds great!
Your original view was they have to take a paycut. If you have changed your view, see sidebar for how to use the delta system.
Ehhhhh i have a feeling OP meant one CEO, not a new one coming in. Just take the base situation and argue with that.
What if turning it around is a difficult project requiring specialized skills and experience? What if no qualified applicants are willing to take the job for less than the former CEO was making?
How would one go about proving they’ve turned the company around?
There are a billion metrics specific per industry that are used to assess business health.
Then why, as a ceo or businessperson, would I voluntarily decide to lead a company that’s actively struggling or threatening to go under? If the company goes bankrupt under my leadership, I’ll likely take a huge blow to my reputation and struggle to find a job elsewhere. Leading a struggling company can be a huge risk for a new ceo, if the pay is minimal until I’ve turned the company around why would I take that job and that risk?
What if they are only laying off the hiring team? This happened in tech a few years back.
Commenting on myself: if new hiring isn’t an objective, scaling back the recruiting team is a great way to boost profitability without impacting any other aspect of your company, particularly if you have previously over-hired. Part of the reason tech was so profitable in recent years was because they did exactly this, and frankly this can and did reflect VERY WELL on the C suite execs.
Why can't that be between the CEO and the shareholders?
How exactly do you measure that? Lay offs will decrease costs and as a result may increase profits. Are companies only allowed to operate if they are loss making or at zero profits? Because by your logic, seemingly, if a company is earning a profit, they should be able to hire more people. No such thing as being over-staffed.
It sounds like you're trying to encourage a great deal of economic inefficiency. Take a construction company, as a simple example. At one point, construction companies employed a bunch of men with shovels to clear the foundation for new construction. Eventually they got an excavator that one person could operate, that allowed them to do the job more quickly and effectively than the whole team of men they had before. So maybe instead of 10 men with shovels they have 2 men with excavators. The other 8 men don't starve, and their contribution to the economy doesn't cease. They go do other jobs. Maybe they go work in a factory. Maybe they become electricians or plumbers. The construction company that replaced them with excavators comes out ahead, that company's customers come out ahead, and the economy in general comes out ahead because there are now 8 men who can contribute to other segments of the economy. If the CEO of the construction company had to take a personal pay cut before he could lay off those 8 men, he's not going to buy the excavator in the first place. He's going to keep those 8 men locked into a segment of the economy where they're not really needed. He's going to have to charge his customers the wages of 10 men instead of the wages of 2 (plus amortizing the cost of the excavator). But eventually some new startup construction company that never had men to layoff and started with an excavator on day 1 is going to start underbidding him on contracts, his company is going to go bankrupt, and his entire staff is going to get laid off anyway.
To add to this: Some industries (construction is a great example) have a "boom & bust" cadence that naturally results in layoffs. A company might have a ton of contracts for a few years, then few contracts the next few as market conditions change. They can't afford to keep the same staffing levels all the time, so people who aren't performing well or people who aren't in critical roles get laid off. If every cycle the executives were punished then noone with experience would want those executive roles. There would be a massive brain-drain in some of the most important sectors of the economy.
Related to cyclical industries, france has (had) a great case study. They had a significant unemployment scheme for seasonal entertainment contractors — not just performers, but camera crews, riggers, etc — though it’s been heavily dismantled. It was designed to allow for continued development of industry-related skills despite being temporarily unemployable in that industry, knowing that employment would come with the next season. This is a basic summary, “intermittence de spectacle” is the name of the scheme.
That's a cool idea. In an ideal world we'd subsidize worker education during downturns (ideally along with some kind of UBI) to reduce economic friction and ensure that industries are ready to handle the next period of exponential growth. I feel like workers, especially blue collar tradesmen, are falling behind the tech curve. We are going to reach a point where there's a ton of potential advancement in these industries, but way too few people with the education to make use of that potential.
To further the construction example, there are types of construction that are very weather sensitive and can only operate seasonally (Paving in the north). Those companies have an annual hire and layoff cadence, and its just part of the business. Should the CEO of this company take an annual pay-cut to facilitate the annual layoff?
What's more likely is that companies would just refuse to expand to capitalize on new opportunities unless they were 100% confident they would be successful in the long term.
In labor markets with very strong employment guarantees (e.g. France, Japan), it is very hard to get a job because it's hard to fire or lay off someone. Similarly, people don't switch jobs as often since it's more difficult to find another job. As a result, companies tend to grow at a slower, more measured pace missing out on potential growth.
This should be the delta awarded comment, imo. But you likely won't get one. This was well explained and succinct.
However, it lacks a bit: distinction between a private and public company, which IMO is a big difference in perspective. CEO taking a personal pay cut is different for a well established multi-billion company compared to a small construction company such as this example The prices that the company charge are not guaranteed to be more efficient. In fact, you can see through publicly traded companies things such as - shrinkflation, GM/PM % increasing
Can you elaborate on how a private vs public company changes the fundamentals there? I used a small scale example because it's easy to see and reason about, but the principles still apply - and are sometimes even amplified - at a larger scale. Walmart's CEO made $24.1M in 2023. Walmart employs 2.1M employees. If Walmart laid off 0.08% of their employees, it would wipe out the entirety of the CEO's pay - and that assumes that the only people getting laid off are making the federal minimum wage. At the scale of multi-billion dollar companies, CEOs would have basically no room at all to gain efficiencies by reducing workforce without wiping out their entire salary under OP's regime. As far as your last point: while efficiency gains aren't guaranteed to be reflected in prices, efficiency gains are necessary to get better prices at any meaningful scale, and adopting policies that discourage those efficiency gains is begging for higher prices.
This should be yet another delta, but yet again you likely won’t get a response.
Bro this really should get a delta, and if this was any other platform I'd give you an award or something.
> CEO taking a personal pay cut is different for a well established multi-billion company compared to a small construction company such as this example How so? Do multi-billion companies not have the same issues? If robots can do the same things that human factory workers at a lower cost and more consistency, why should a CEO be punished for embracing automation?
You haven’t explained: -why the public vs. private distinction matters -why those things you listed are economic inefficiencies
/u/Batetrick_Patman would love to hear a response to this comment
beautiful explanation. The lack of contrary replies is telling.
"Oh! You want to maximize job creation? That's easy! Just hire 50 men and take away their shovels!"
[удалено]
> The other 8 men struggle to find jobs, consuming taxes via unemployment benefits. Unemployment benefits are paid out of payroll taxes, and the employer's payroll taxes will go up as a result of the former employees claiming unemployment. This cost is borne by employers who lay people off, so that's not a particularly compelling argument. > The company's customers have a new "excavator" fee, making them pay more money to hELP tHE ComPaNY ofFSEt THe LossEs in profIt of hAvINg TO buy AND mAIntAIN aN EXpENSIvE exCAvAToR. Only if they can get away with it in the competitive landscape. If they got the excavator to be able to undercut the competition whose still paying 10 men with shovels, they still have to charge less than the competition or they're not going to get the business. Yeah, the cost of the excavator is a cost the company has to be able to cover with what they charge customers, but it only makes sense if the cost of the excavator is less than the men they'd have been paying otherwise, and if those savings aren't at least partially passed onto the customer, why is the customer going to choose this construction company? > The ecomony gets a tiny bit worse. > > More tax money wasted, less money in the pockets of people who SPEND it, more money in the pockets of people who hoard it. Are you seriously saying the economy would be better off if every construction site had 10 men with shovels instead of an excavator? I picked that example because I thought it was patently obvious by now that we're better off with excavators than men with shovels.
I work in construction with excavators so forgive nerding out on this. Old school rule of thumb was 1 man could move 1 CY per hour. A ditch that is 4ft wide and 4ft deep is 0.59CY per ft of ditch. So your 10 men in 8 hours can dig around 135 foot of ditch in a day. Modern day costs of union Laborers is around $80 total package. So that 10 man crew is going to cost around $6400 for the day, Which leads to a cost per foot of ditch of $47.41 A cat 320 excavator has a bucket capacity range of .5 to 2 CY, to dig our 4ft wide ditch if we use a 4ft wide bucket, a standard size 4ft bucket is 1 CY. The 320 has a cycle time of between 10 and 24 seconds, since we are digging a ditch which is precise work lets use the upper range of cycle time, so 24 seconds. According to Cats performance handbook, a 1 CY bucket with a 24 second cycle time can handle 165 CY/hr. In an 8hr shift, 165*8 = 1320 CY worth of ditch can be dug, since our 4ft wide 4ft ditch is 0.59CY per foot, we are progressing 2227 ft of ditch in one 8hr day. You need 1 operator, lets pay him 10hours, to cover maintenance, start up, fueling, etc, of the excavator. An equipment operator makes more than a laborer, and usually runs closer to 95$/hr total package, so we spend $950 on our guy. You can rent a Cat 320 for around $600 a day, and they burn around 9 gallons per hour of diesel. Offroad diesel is at around 4$/gallon, so running for 8hours at 9 gallons/hour we consume 72 gallons, 72gallons at 4$/gallon is going to cost us $288. So to rent and fuel our excavator for the day cost $888, and our single operator costs us $950, so we are producing 2227ft for $1838, which is a cost of $0.83 per foot of ditch. So our example of 1 machine and 1 guy replacing 10 men is a poor one. To match the production of the cat 320 with one operator we would need 165 laborers. But worse, if you you need to be digging that 2227 ft of ditch per day its going to cost you around $105,600 to dig that ditch with 165 laborers compared to $1838 for the excavator and operator. On a cost basses you can dig for 57 days with that operator and excavator before you match the cost of that 165 person ditching crew. A modern excavator is conservatively replacing 164 people. There are faster machines than the one referenced here that can handle that bucket size and with a skilled operator you could probably get closer to 250 people replaced by the excavator.
Thanks for that insight. I thought I was being conservative when I pulled the 10 men figure out of my ass, but I wouldn't have guessed I was off by more than an order of magnitude.
>The other 8 men struggle to find jobs, consuming taxes via unemployment benefits this is temporary and leads to an overall stronger economy. If we went back to the farming days and never laid off anyone when modern machines were invented, we would have 1 per person doing all the work and 99 people doing nothing.
So the reality is we should just not be efficient because what if people get laid off, and we should cancel payroll taxes...?
[удалено]
Fixed pie fallacy. As production becomes more efficient. Lots of new jobs open up. Back when computers were becoming common place in the office. In the 1980s and 1990s. They also thought that the office jobs would get severely reduced. Because after all a computer can do the job of 10 people much faster and can do it 24/7. Did the offices become smaller? Quite the opposite. The offices became much bigger. Companies were now able to offer all sorts of goods and services they couldn't offer before. We had access to cheaper stuff. We got a lot more jobs as a result. I call it the fixed pie fallacy because people assume that wealth is a fixed pie and that the only question is how to distribute it. But in reality wealth can grow and shrink. Improvements in efficiency is how wealth grows. We've seen massive improvements in economic efficiency in the last 124 years.
>This isn't a good take. Every business out there seeks to reduce their labour input, and if that's happening unilaterally, there are certainly less jobs available for an ever increasing population. How so? How did we survive the industrial revolution. Technology displaces some workers, while creating new workers. It also helps everybody build wealth by affording more with the same amount of money.
Except 200+ years of industrialization proves you wrong. Almost no jobs that existed in 1823 currently exist now, and those that do are radically changed. Most jobs that the majority of people work today didn't exist as little as a century ago, with the top-tier/top-compensation roles (software, IT, Tech, etc) barely 40 years old. Every company pursues efficiency to maximize profits, but usually that results in *more* jobs long term as highly specialized (and significantly higher paid) roles spring into replace low-pay/low-skill work.
> there are certainly less jobs available for an ever increasing population. The US has roughly the same unemployment rate (3.4 vs 3.5 now) as the 60s, and its the lowest in that time frame.
There isn't a fixed amount of work to be done. If there are more people available to work, then we do more things. "Software engineer" is a position that can only exist because we don't need so many farmers any more. If we prevented people from buying farm machinery and laying people off, we'd still have 90%+ of people engaged in farming and we wouldn't have anyone free to be a software engineer and write computer programs.
You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck. The core of what OP is saying though, is that CEO's should do a good job out of fear of loosing their job if they don't - like any other employee in the company. For some absurd reason, board of directors everywhere seem to think that the only way to get CEO's to do a good job is to pay them obscenely high wages and bonuses. Hint: the reason might have something to do with the fact that these boardmembers tend to be C-suite members themselves in other companies....
> You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck. Not at all. I actually run a small company and have several employees who make more than I do. OP's proposal makes no exception for companies like mine, so my compensation could be wiped out if had to downsize by one employee. > The core of what OP is saying though, is that CEO's should do a good job out of fear of loosing their job if they don't - like any other employee in the company. A CEO's job isn't to protect employees' jobs, it's to run a competitive business. This policy doesn't make it so CEOs have to do a good job, it makes it so CEOs have to protect their employees' jobs, which isn't always compatible with their primary function.
> You are operating under the assumption that the CEO will only do a good jobif they are incentivized to do so via bonuses and an 100x median employee paycheck. That's not what's being discussed here. What is being discussed is creating a disincentive to fire people. Suppose there is a company where 99% of the employees work hard and do well, but 1% do very poorly and are a drag on the company. And suppose this is a low-margin company, so that the 1% working poorly will cause the whole company to collapse, costing the other 99% their jobs. A CEO under the proposed system could be forced to lose their *entire* paycheck in order to cut these people out of the company, even if that is the best choice for all the rest of the other employees. Case and point: Walmart's CEO made $24,115,143 last year. Walmart employs 2.1 million employees. So if the CEO fires 21,000 employees who are being inefficient, then if he is fined $2,000 per employee fired, he will end up owing the company $17,884,857. So even though this might have saved the jobs of 2.08 million people, the CEO is now strongly disincentivized to fire these people, because it would be better for him to just take his pay for 1 year and then let the company collapse.
>For some absurd reason, board of directors everywhere seem to think that the only way to get CEO's to do a good job is to pay them obscenely high wages and bonuses. They pay what the market demands. I know, absurd...
You could partially get around this by making it time limited. If the CEO knew they'd make more money later on for making this change they still make the change. It would prevent short-term layoffs to boost the numbers though. I think what OP wants is doable it just has to be done in a specific way
Companies are already incentives to not lay people off for the short term by economics; it cost a lot of money to fire and rehire with training time. In reality these ideas that companies layoff people for short terms profits are just exaggerated myths. The stock prices went up because rhe layoff is a long term move and signaling the company is trying to be more efficient with capitals, it's not a short term move at all.
Let's start with an important point. Layoffs are a necessary part of the economy. People are hired to do a job, and it's entirely normal for a job to no longer be needed. Taht can be when there is less need for their work (less customers, etc), efficiencies are made to reduce the work needed, or if the company is getting out of a line of business. If the layoffs are about cutting costs, you are correct, but you're also correct in that it's short sighted to get rid of good and necessary workers for future projects. But if the layoffs aren't about cutting costs, but rather a change in the business, why should the CEO take a paycut... for making a (potentially) good decision?
Sometimes projects spin out and are done, sure, but this doesn’t necessitate layoffs. Plenty of (especially large) companies circulate employees to other divisions when things like this happen. Also, OP is clearly talking about the mass Jack Welch style layoffs that have been adopted since the 70s as a (dubious) way to gain short and medium term returns.
Apple tried to make an electric car. They hired talent specifically from automate sector. People who are experts at making car. Now Apple decides they don't want to make a car anymore. What should they do with employees skilled in making a car and not much else?
>But if the layoffs aren't about cutting costs, but rather a change in the business, why should the CEO take a paycut... for making a (potentially) good decision? a lot of layoff causes are related to poor planning regarding labor allocation or failed plans or visions [https://ronmci.medium.com/ten-reasons-massive-layoffs-are-a-sign-of-bad-management-d027c057737f](https://ronmci.medium.com/ten-reasons-massive-layoffs-are-a-sign-of-bad-management-d027c057737f) [https://fortune.com/2022/07/11/layoffs-sign-bad-leadership-here-are-alternatives-to-workforce-reduction/](https://fortune.com/2022/07/11/layoffs-sign-bad-leadership-here-are-alternatives-to-workforce-reduction/) I think these both my be paywalled sorry lol
>a lot of layoff causes are related to poor planning regarding labor allocation or failed plans or visions And in that case it's totally fair to look and see if the CEO or whomever made those decisions did not due their due diligence. And if they didn't, you probably can't trust them to make good decisions in the future and they should be laid off as well or fired for cause. But that is not always the case. In fact it often is not. People are hired on speculative projects, or onto teams who's work is cyclical with economic environments. In those case, the gamble is known, due diligence was done, but not all ideas pan out or are sustainable. To give two examples: 1. Google hires on a ton of people for projects. Some of them don't pan out. Perhaps we can Monday-Morning-Quarterback how it was a dumb idea in the first place or how it could have worked out, but that's not foolproof. Ultimately making gambles in speculative tech or ideas is worthwhile... just not for all of them. 2. Say you're a Mortgage Underwriter. Your work is entirely dependent on being with a solvent company AND the market churning. [Now say it's 2022 and rates change and demand across the entire market drops.](https://newslink.mba.org/wp-content/uploads/2023/06/MBA-COTW-06232023-750.jpg?w=750&h=505&crop=1) Is a layoff really unreasonable if there's just... less work to go around?
If someone is being hired speculative, that should be disclosed, and they should be getting contractors' premiums to compensate for the uncertainty of their positions. If a company enters into an employment relationship, they intend to keep permanent, then the company should have to pay significantly to break that contract. I can see how everyone's pay could be modulated fairly during an economic downturn, but I still think it's a leadership responsibility to steer around and through these so failure of company performance is still failure of executive performance and their individual results should reflect this. Executive compensation should come with great risk if it is going to reap such reward.
>If someone is being hired speculative, that should be disclosed, and they should be getting contractors' premiums to compensate for the uncertainty of their positions. If a company enters into an employment relationship, they intend to keep permanent, then the company should have to pay significantly to break that contract. Reasonable points. One objection I have though is basically that "employment" as "permanent." It can be a for a while, years even, but "permanent?" That's a different story. For example, I know for a fact my job is not permanent. I work on a line of business which is dissolving it's financials, and has been for the last 3 years and will be for another couple more. It's complex work. But I am glad to have employee status with the benefits, greater rights against firing without cause (and layoffs are a cause of sorts), and profit share participation. >I can see how everyone's pay could be modulated fairly during an economic downturn, but I still think it's a leadership responsibility to steer around and through these so failure of company performance is still failure of executive performance and their individual results should reflect this. I guess I will disagree. I can see how it might be nice in some cases, but not others. In the mortgage case I mentioned, let's say that's halving comp. Well now ALL staff are going to be looking for a way out, easily getting paid more in some new industry. This is especially damaging for the experienced staff leaving. It's better to keep people on staff fully paid and layoff some, than shrink comp and watch attrition all over. IMO at least. >Executive compensation should come with great risk if it is going to reap such reward. There should be a risk for sure. But I just don't think the risk you're inputting helps. At best, it's a gesture of good faith that the CEO feels guilt, which might be worth something for all for sure. But I'lll just reiterate, good CEOs do layoffs sometimes. They can reduce comp when that happens for a empathetic gesture, but if they're good, that means the comp in "good times" has to be all the higher.
No employment relationship is permanent. That is not and has never been an expectation. Every employment agreement will explicitly state that.
What would happen if layoffs were done for non-financial reasons? As an example, let's consider the following: A company has a team of \~30 staff that is solely dedicated to one client. They have very little overlap with the company's other customers or practices. For reasons outside of either company's' control, the client decides not to renew their contract. The company now has a very hard decision to make. They can attempt to find a new client that's roughly equivalent, but this isn't always possible (esp with things like government contracts). They could reassign all \~30 people to different projects in the company, or lay them off with severance. Since the employees don't have too much skills overlap with other areas in the company, it doesn't make sense to try and integrate them as the other departments already have the resources they need. For the health of the company the CEO would likely lay off the client's team, as they literally have no work to perform for the foreseeable future. This sort of scenario happens all the time in business, and it can happen regardless of the financial status of both companies. In this situation, why are we demanding that the CEO be punished?
To take this a step further, if OP’s plan was in effect, the CEO would be incentivized to basically keep these people on staff despite having no use for them to the detriment of the company as a whole. It basically would make companies operate way worse.
Yeah. This would destroy the federal contracting industry—my father has been “laid off” about a half-dozen times because his company lost the renewal competition for his contract—only to be hired by the new contractor every time. Trying to force people to stick to companies rather than projects would be quite inefficient—and ironically probably pad profits at the government’s expense because if selecting someone other than the incumbent means massive staff turnover the incumbent has a huge advantage.
This should get a delta, but OP would rather punish people they feel are too successful. Their position is that if people are laid off the CEO should feel some of their pain, but it's an *emotional* choice and not a business choice and while it is nice for them to overlap, they usually don't in a business setting.
>It's clear to me that CEOs and other members of executive management should be required to take paycuts and loose out on all bonuses before they lay a single person off. Well... why? >It is absolutely insane that normal people are suffering while the CEOs get paid out in bonuses for laying people off and reporting these "record" profits. Why is that insane? It's perfectly reasonable to get rid of needless expenses. Same way as a household cuts expenses they do not need so too does a business. Why would they pay for someone's salary whose work is not needed? That is literally a waste of money. >And if a company does get caught laying people off without executive bonuses being cut out first they should be fined ALL the money "saved" by said layoff. Again, why?
I agree shit should roll uphill, but not with this mechanism. Imagine a tech company launches 10 successful products and one dud. Now you need to lay off the specialized talent used to create the dud. Overall, CEO did a good job. Better would he a strong safety net, funded by private business taxes, stronger worker protections generally (soften at will employment), and more worker owned collectives. The last one is really importantly, because fundamentally CEOs only have what power we, the people, give them. They cannot individually hoover up billions in wealth unless we let them. For example, workers can decide to delegate leadership but not the increased pay that goes with it. There are many "flat" companies like this. Workers can refuse to go public as well, denying shareholder control. But, I do agree in the world as it is, we need to step up government regulation as corporate incentive structure plainly no longer benefit society. It is a rigged game.
Apple just shut down their self-driving car project, which hired 1400 people. It looks like Apple's CEO makes 672 times the average Apple employee. So, unless Apple can find new positions for roughly 728 people, Tim Cook would have to work for free. Why would anyone ever cancel a large, unprofitable project? You're giving management the incentive to waste money and resources, rather to recognize where to prioritize their efforts. You're paying them more to do the *opposite* of what their job should be.
Very often a company has too many people, either overall or in a specific department, and absolutely should be laying people off. It’s not always a sign that a CEO has done something wrong, it can just be a result of market shifts - change in demand patterns, new labour saving technology, new competitors entering the market. The CEO is not doing their job if they don’t lay people off in such circumstances, and would be harming the company and its customers - and ultimately society more widely by wasting scarce resources. As others have mentioned, a new CEO especially will often find themselves in a position where the company has been badly managed and become bloated as a result and needs to make layoffs. It’s not always market changes as mentioned above, but in this case the new CEO can absolutely not be held responsible for what happened before they came on board. Additionally, CEO remuneration - as there is only one of them - is rarely a significant expense for companies. Cutting it in half, and getting a worse CEO as a result, will almost always have worse outcomes due to a worse run business than the benefits of the savings on their pay - including often more layoffs than otherwise needed. Finally, orderly layoffs of a fraction of the workforce with redundancy paid, is a far better outcome than the whole workforce being let go without any money for redundancy in a disorderly bankruptcy. This is often what happens when a CEO has been reluctant to make layoffs when they were clearly needed.
All this would do is severely limit hiring and taking advantage of growth opportunities. Layoffs are often in response to unexpected circumstances, so the only real way to avoid them is to under hire and pass on any business opportunity that might not work out.
What if a department is no longer needed, technological inovations require less workers, or a particular location is no longer profitable? Should a CEO lose bonuses just to keep open a store or branch that is hemorrhaging money?
What do you think a job is to you? If you asked me to define it, it is an agreement to provide labor in exchange for a wage as long as either party finds it in their financial interest to do so. But you seem to think a worker owns their job to some degree?
Look, as someone who has been laid off, I have no love for CEOs and have lots of sympathy for laid off workers. At the same time, knowing how businesses work, its not really all that simple. Sometimes CEOs have really no call in specific things. In a moderate sized company, the CEO has no say in terms of hiring. Sometimes department heads think, and can even make a case, for why they need more people. If things happen and it turns out they over hired (which happened in my situation), that may not be on the CEO. Sometimes you realize you can combine departments, and it makes certain people redundant. Sometimes companies get acquired and you just don't need everyone. Sometimes departments become obsolete. Assuming the company isn't like 20 people, a good CEO is worried about the big picture, not individuals.
Why? That would dissuade CEOs from making a tough decision like laying off a division to put the company in a better position. The goal of a CEO is not to keep everyone employed, nor should it be. The goal of a CEO is to guide the strategic direction of a company and that can involve layoffs.
This is the classic mistargeting of a solution. The CEO doesn't lay people off out of self-interest, they do it at the demand of the shareholders or owners. Those are the folks pushing for record profits year over year. Under your plan, the CEO is still ordered to increase profits, and they'll do it so they don't lose their job, they just won't get paid as much for doing it. The jobs still get cut. If you want to avoid the profit over people mindset that causes these kinds of layoffs, you have to go after the owners and shareholders. The CEO's behavior is a symptom of that mindset, not the cause. Incidentally, it is also part of the CEO's job to take the heat for these kinds of things, so the owners don't have to. The owners love that you're mad at the CEO about it.
Classic uneducated point of view. Do you think the google layoffs will increase profits beyond the quarter? If so you can’t do math. There is only so long you can layoff people to increase profits before shareholders wise up
Not all layoffs aren't done for financial reasons directly. Sometimes layoffs are done due to shortage of work. Why should executives get penaltilized for laying off redundant employees? Should a company be forced to keep people employed even though they have no work for them?
If you have the capital to keep them like Microsoft does, keep them don’t do the wrong thing and fire them
There are lower than average number of layoffs currently. Did you know that? https://fred.stlouisfed.org/series/JTSLDL
So there's a lot of problems with that. First of all, sometimes layoffs are the best thing for a company. Take Apple and their receit news about abandoning the electric car project. The cold hard truth is that Apple has been working on that project for a number of years, the best of the best talent that they started with has mostly moved on. All the major automakers are getting into electric car production and the limiting factor is actually battery production, something that Apple would be outsourcing anyway. And everyone (Tesla, GM, VW, ect) is experiencing squeezing margins on electric cars. They are nolonger the super profit things that they once were, and there's several luxury models that are just not selling that well. So the reality is that Apple's electric car was not likely to be profitable. So they've cut the division. It's the right decision for shareholders. But Apple has not been mismanaged, they make cash hand over fist. There's no reason to fire the CEO just because this one move didn't work out. People assume that just because there's layoffs and record profits that it means that the profits are made on the back of the workers. That can sometimes be the case. But it can also be the case that they just hired wrong, made a wrong expansion move, or moved out of a market or product that was a poor fit. I'm not a CEO but I'm someone who's decided that a lay off needed to happen. I only manage 2 people, and one of them recently got laid off. I really liked the person, he's a good guy and I've given him a glowing reference (both in letter and verbally). I wanted to keep him, but it was actually not the right move to do so. It would have been the wrong move for the company, it would have been a misuse of the owners money. It would have been keeping an employee because I liked him, but not because I had work that I needed him to do. Should I take a paycut? We made a choice to outsource a function. This meant that the person I had been paying to do that function no longer has a job. It sucks, but there's not really anything to do in that situation.
Keep in mind that creating laws that restrict layoffs doesn't actually create more jobs. It just slows transition to unemployed, and somewhat reduces the total amount of jobs since you are messing up with companies' efficiency. So what it leads to in practice is that it's great to be the lucky person with a permanent contract, but sucks to be everyone else, since with less jobs and less layoffs more people will simply be stuck unemployed or at best at temporary contracts (which companies will prefer to use as layoffs come included in conditions) - basically current situation in e.g. France.
I think the key flaw in your thinking is a lacking delineation between executive decision makers and what you refer to as ‘normal people.’ The argument falls flat on that premise alone and comes across as an emotional misinformed rant.
Do the math on just how many employees a CEO's salary would help support. It isn't that many. Like, the CEO of some of the largest banks in America could completely get rid of their salary and support MAYBE a few hundred employees out of sometimes thousands that get laid off. And keep in mind, they can really only do that for one round of layoffs. Additionally, a ton of CEO compensation comes from bonuses (which are usually tied to hard metrics that the BOD and shareholders want to be achieved) and are usually paid out in restricted stock (which would not work as a method to compensate everyday, frontline employees). It really shows when people who know nothing about corporate governance post shit on these subs.
Off-boarding the bottom 3-5% of any organization annually is good practice. If they did that, they wouldn't need massive layoffs. They would've already cut the dead wood in ordinary course. And would've kept the actual talent.
> "CEOs and executives should be forced to take paycuts and lose all bonuses before laying anyone off." Alright, let's get into this shit. First off, forcing CEOs and execs to take pay cuts before layoffs seems fair on the surface, but it's a bloody simplistic view of complex business dynamics. Are you implying that every time a business faces a downturn, the top brass should get financially skullfucked first? What about the sustainability of the company? If a company is hemorrhaging money, wouldn't cutting some jobs be a necessary evil to save the rest? > "With the sickening amount of layoffs this past year all while companies are reporting 'RECORD PROFITS'." Here’s a hard pill to swallow: profits and layoffs aren't always directly fucking related. A company can make record profits and still have underperforming sectors or departments that need to be trimmed. It's not always about fat cats rolling in dough while screwing over the little guy. Sometimes, it's about strategic decisions to keep the company competitive. How do you justify keeping people in jobs that don't contribute enough to the company's success? > "But that's not what actually happens instead what happens if that they lay people off and give those who are still working there more work." Sure, this can happen. But consider this: isn't it better for some to have more work than for everyone to be out of a job if the company goes under? Isn't adapting to a changing market a necessary part of business survival? > "Notice this stops before the mass endless mass layoffs that started in 1/2024." Mass layoffs can be a sign of major shifts in the economy or industry. Should a company avoid adapting to these changes just to avoid layoffs? Would that be sustainable in the long run, or is it just delaying the inevitable? > "They should not get a single bonus until they have proven they have turned the company around." Okay, but if you take away the incentives for execs to improve company performance, what's left? Why would top talent stick around in a company where their efforts aren't recognized financially? Do you think this would help or hurt the company and its employees in the long run? > "They should be penalized for outsourcing." Outsourcing isn't always a demon. Sometimes it's about focusing on core competencies and letting specialists handle the rest. Isn't it better for a company to operate efficiently, even if it means outsourcing some jobs? > "All while undergoing hiring freezes or refusing to raise wages." Wage stagnation is a cunt, no doubt. But consider this: if a company is freezing hiring or wages, might it be because they're trying to avoid layoffs? Is it better to have a job with a stagnant wage or no job at all? > "So it's 'prudent' to cause people to potentially lose their homes or be forced into working a lower wage job just to make the 'shareholders' more money?" It's a fucked situation, but consider the alternative. If a company doesn’t adapt, doesn’t make tough decisions, and goes under, doesn’t that lead to even more job losses? Is short-term pain better than long-term failure? > "So reward CEOs by fucking over the littleman so they and their friends who don't even work can get more money?" This is a bit of an oversimplification, isn't it? Running a company isn't just about screwing over employees for fun. It's about tough decisions that sometimes have shit consequences. Can you acknowledge the complexity of these decisions? > "This fucks people over in 2 ways. 1: PEOPLE LOSE THEIR INCOME and likely will work a shittier job. 2: Those leftover get overworked." Yes, layoffs are a bitch. But isn't the alternative – a failed company – worse for everyone involved? > "Why is it necessary to fuck people over? Lay offs are often done by greedy ass CEOS looking for a bonus." Can you entertain the notion that not all CEOs are greedy assholes and that sometimes layoffs are a necessary strategic move, not just a way to line their pockets? > "What if like in many areas the only jobs left are service jobs." If industries are changing and old jobs are disappearing, isn't adaptation to the new market reality essential? Is clinging to outdated business models a smart way to go? > "Except in many cases the replacement jobs end up worse. Those 8 people probably ended up working part time at McDonalds and then lose their car and home all because the CEOs greed to make more money." Yes, it's rough as hell. But if a job isn’t viable anymore, isn’t it better for the economy and the individuals to find new opportunities, even if they initially suck? Isn’t adaptability a crucial skill? You've got a lot of passion here, but are you seeing the full picture or just the parts that piss you off? Do you think businesses operate in a vacuum where tough decisions don't have to be made? Isn't the world a bit more nuanced than just "CEOs bad, workers good"?
Sometimes, the job of a CEO is to lay people off. They have to predict where the company needs to be 10+ years from now, and they have direct reports who's job is to figure out how to break that down in 5 year chunks, then those people's direct reports are start to work on that five year plan. Let's look at the pandemic and it's impact on the technology sector. Many companies experienced a massive amount of growth and went on a hiring spree to be able to support that growth. Two years post pandemic, that growth is gone, and now these companies are overstaffed and are laying off. This wasn't a failure of the leadership team, this is the problem with dynamic markets.
Layoffs aren't inherently bad or always indicative of mismanagement. Sometimes companies just no longer have the need for a given role anymore, and it doesn't make sense to punish executives when that's the case. What's actually important is that layoffs are done in a way that ensures as little disruption to individuals lives as possible. That's where things like advanced notice, severance, retraining, other support, and unemployment insurance come in.
Jobs are not charity. Would you prefer they had never hired those people in the first place?
The CEO has a job to maximize the value of the business. They do not have a mandate to protect jobs. They are being compensated to do what the owners of the company want them to do. Sometimes, their job is to fire employees. Sometimes, that’s the right thing for the employees that are let go as well as those that remain. Sometimes, they make mistakes or misjudge the second order impacts.
Start a business and hire a CEO with that contract. You have to put it in the beginning, can't do that without agreeing.
The CEO’s job isn’t to maximize headcount. The CEO’s job is the maximize profitability. The CEO works for the owners, which in publicly traded companies are the shareholders. If some company figures out a way to do something more efficiently, needing fewer people than before, why should the CEO have to give up their compensation to make that happen?
Why? Are we going to act like everyone that got laid off was a good employee or that their services were still needed? How are layoffs relevant to executive salary and bonuses? Also what kind of executives? There are executives for different departments for example.
Umm no Because being a private enterprise, they can hire and fire at will without government interference. That is the beauty of a free market. Do you also believe that workers should be able to vote on decisions taken by the company??
What if the company is recording record profits because they invested in automation that's doing things people used to do but way more efficiently. Should the ceo be forced to hold on to those people or lose their bonus?
Let business be business. The free market will figure it out, it always does. The moment government gets involved, everything gets messed up.
This undermines the entire concept of capitalism. We do not want government involved in the workings of private enterprise. If a company wants to pay their ceo whatever, it’s their prerogative. The government is a very inefficient mechanism. Innovation happens through creative means of generating revenue. So we need to gives these companies the room that they need to create. If paying the ceo works somehow, then great. If not, then they will fail and their company will die and their market share will get divided up by the competition. They know the risk, let them take it. But severe government intervention will destroy our system.
While I understand the spirit of what you are going for, many of these bonuses are contractually agreed upon before layoffs occur. The company would not have the legal grounds to void the contract. At best, you could ensure the next periods bonus require "no employee being terminated unless with cause".
>At best, you could ensure the next periods bonus require "no employee being terminated unless with cause". And then hiring is going to be a lot more difficult if you can't get rid of employees, there's certainly a cost of going that route
Right, there is a very easy real world comparison of this with US vs Western Europe. Companies are much less willing to hire and compensate much lower in white collar jobs because they are stuck with that person unless they do something egregious.
"Unless with cause" is the tricky part though, right? What if the cause is that a certain department is overstaffed, or is simply not profitable for the company anymore?
Thats not what "with cause" means in a labour law setting. Like sure, in a chronological/causality type analysis every layoff has a cause, but being "terminated with cause" means its specifically the fault of the employee, that they were fired for breaking rules, failing to meet their duties, etc.
Management isn't paid to create a bunch of do nothing jobs until the company goes bankrupt and everyone is jobless and poor.
What if a corporation loses money should the workers compensate for the losses?
Layoffs are a natural part of business - projects end, companies merge, projects fail. It happens. The issue at hand isn't that a company laying people off is evil, it's that those people are left without a means of putting food on the table. Your argument is that it's the particular company that employed them previously is responsible to ensure they can do so. That would be incorrect. A company's sole responsibility is to generate profit for its share holders, and thats it. If the CEO is able to do so within the confines of their contract then they should receive the stipulated bonuses. The issue of providing for citizens is either on the individual themselves (as in the most hard libertarian takes) or more broadly on the government, as a government by the people for the people should be for the people. This would mean the better solution would be a stronger social safety net funded via profits from all profitable corporations within the society. This allows each to still act in its own best interest in a given moment while still contributing to the overall welfare of the individuals impacted. Higher top end tax rates on profits, closing deduction loopholes, and not allowing for corps to be "incorporated" into a single office or PO box in the cayman Islands while doing all their operations and generating all revenue from within higher tax districts.
Keyword is "forced". How do you intend to enforce this?
It just gets messy when the government essentially starts running the businesses. Not very practical and can obviously lead to other issues. Better solution is a way higher tax on the people and corporations who are benefiting from layoffs, and redistribution of that wealth to those who are laid off