No, I dont think there should be a penalty by default.
The objective of a company isnt and shouldn't be to run a charity. Some amount of layoffs are desirable just as a matter of housekeeping. Layoffs can be a hard part of doing a good job.
I think there are extreme examples and tactics where layoffs cross a moral line but not a legal line. for example, I think the humane thing to do is freeze hiring before layoffs so you dont relocate someone only to let them go.
That said, there are already a lot of business incentives to avoid turbulence in headcount. It is slow and expensive to hire people and let them go.
>I dont think there should be a penalty by default.
I do.
>The objective of a company isnt and shouldn't be to run a charity.
Charities pay employees too. 501ks don't mean you run on all volunteers and that it's okay to remove them at your whim. Horrible metaphor.
Anyways, a company has 3 goals
1. serve the customer
2. support your labor to enable efficient production
3. overall stimulate the economy and society
These all help the bottom line of "make profit". Shareholders have little stake here so it's annoying that that is all they prioritize lately. because you then break all 3 rules just for them, who will leave on a whim for some other speculation. And then they wonder why they lose money as workers burnout and leave, as customers get frustrated and move, and the economy gets worse as money is pocketed to the rich instead of the public.
It'a all a horrid death spiral. It needs to stop. It will stop forcefully if not voluntarily.
>It is slow and expensive to hire people and let them go.
And who's fault is that? I don't remember shouting in glee whenever I hear 5 rounds of interviews, including 2 rounds dedicated to trivia.
>Its actually incredibly hard to to figure out which people to cut in an efficient manner.
it is. That's why Hanlon's razor simply tells me they aren't trying very hard. They need to cut numbers, maxiize money and care about next quarter next quarter. efficiency wasn' prioritized before the layoffs, why would it be now?
I dont think we agree on enough fundamental facts about the world to have a productive conversation. It seems like you are in denial about the possibility that some workers can be detrimental to bottom line profit and efficiency.
By the way, the charity comment wasnt about volunteers. Companies are not run as a non-profit charity with workers as the beneficiaries.
Yes we are. You're in denial that most of these layoffs are performance based, and not because of factors beyond their control.
If you're cynical about your peers to think that the default of them in the field is unprofitable and unproductive, we have nothing to say to each other. Learn some empathy.
/s aside
Its actually incredibly hard to to figure out which people to cut in an efficient manner. It is one of the reasons companies suck so bad at doing it, and many avoid layoffs and firing when they should be doing more of it.
to play devils advocate, there are different levels one can look at that. From the level of the companies and owners, the goal is to make money.
From the perspective of society there are tons of answers. A common answer is that companies provide goods and services that give consumers more value than they cost, thereby enriching the lives of consumers.
It seems like some people, especially those who take issue with layoffs, tend to think the social purpose of companies is to give jobs/money to workers. This leads to a lot of frustration for those people because the entire economic system is set up such that jobs are an optional byproduct of making goods, not the other way around.
We live in a society where there are more metrics than money. The entire notion of corporate amorality is a thin veil that people use to hide their own unethical and immoral behavior.
That's why I made the comment that layoffs are the trolley problem. It's an ethical question and companies don't always make the ethical choice, for example choosing profit over jobs in a downturn.
That presupposes an ethical obligation to provide jobs, which is of course at the center of this.
If you think companies have a ethical obligation to provide jobs and do so continuously, of course you will find issue with the rest of it. All objections stem from this, and it is controversial.
I disagree, and think you're missing the forest for the trees. I think that people have an obligation to keep their promises to other people - that's a virtue called honesty or integrity. When a promise needs to be broken, that presents an ethical dilemma.
One example of people making a promise is hiring. A layoff is fundamentally breaking the promise you made to a group of people to keep them employed - whether that's the most ethical choice or not circles back to the trolley problem. If 20% need to be laid off to save the 80% then it's not an unethical choice. If 20% need to be laid off to make up for the mistake of a small group of leaders in order to benefit the small group of shareholders, then it's unethical.
> All objections stem from this, and it is controversial.
It's only controversial when you pretend that you can absolve an unethical choice by placing it behind the corporate veil. It's not controversial outside of Milton Friedman disciples.
Huh? A promise to keep people employed? If it's not in the contract, it hasn't been promised. You're fan-fictioning a promise that was never made to manufacture an ethical issue that's not actually real.
If the contract says you'll get 60 days notice and you don't, that is a broken promise (and an actionable breach of contract). Firing someone you hired is not a broken promise. You don't have to be a Milton Friedman disciple to refrain from gaslighting about employment being a promise to keep people employed forever.
It's called the "social contract". You do good work and make me money, I keep you around and let you keep doing good work. It's equally a cynical and fair interpretation of a company.
This was broken long ago, so I understand it being a foreign concept, but it's something my grandparents told me about when giving me my bootstraps to pick myself up with. Now it doesn't matter how much you make them because you can't outpay their ability to save on tax breaks or make funny monopoly number go up. So we're all doomed.
>Firing someone you hired is not a broken promise.
depends on the contract and laws around it. This is far from universal unlike the social contract described above.
> It's called the "social contract". You do good work and make me money, I keep you around and let you keep doing good work. It's equally a cynical and fair interpretation of a company.
If it's more profitable not to fire someone, because they're making the company money on net — given a big picture perspective — then they don't get laid off. There's no profit in laying off workers who are making the company more than they cost.
Where workers often miss perspective on this is in looking only at the smaller picture. Things can be making money in the small picture while not being profitable in the big picture, e.g. Kodak's film production operations before the rise of digital photography. If the business needs to be building digital cameras and the capital needed to do that is currently tied up in traditional film, the fact that employees working on film production may be profitable on net given the current capital allocation doesn't mean they're profitable in the big picture. And it's often a very, very good thing for society when a company in that position lays off a bunch of people and reallocates that capital, as it would have been with Kodak had they fully committed to digital earlier.
>There's no profit in laying off workers who are making the company more than they cost.
Yeah there are. If a worker is paid $100k, makes 1M for the company, but you have a 20M dollar tax incentive to bring people back to office: it doesn't matter if that worker is a 10x-er. It is more profitable to tank your productivity so you get a cushy tax break if that worker can't/doesn't want to RTO.
That was my core point on this "social contract" being broken. Companies are more interested in finding loopholes to save money than ways to make their products more attractive and grow other revenue sectors. There are a dozen more examples of this. It's not that they aren't productive, it's that the company found non-labor ways to make or save money.
>Where workers often miss perspective on this is in looking only at the smaller picture. Things can be making money in the small picture while not being profitable in the big picture,
And it's where companies miss when they look at next quarters earnings call instead of years later. Boieng is reaping it's rewards from over a decade of doing this. You can't screw over your employees and degrade quality to a point of costing lives and then suddenly wonder where it all went wrong.
why do you think these people are making the company money? The CEO and stockholders all seem to think the company will make more money without them then with them?
Do you think hiring is a promise?
What do you think the promise consists of? I think you are projecting a promise where you want one to be, but nobody is actually under the impression it exists.
Neither employers and employees are under the impression jobs are for life. If you're concern is primarily honesty and promise, would this piece satisfied by a written declaration and acknowledgment that the duration of employment is not indefinite and can change based on the arbitrary whims of the employer?
If you remove the corporate veil, what do you think the promise is for one human hiring another, and the ethical requirements. If I hire a housekeeper or babysitter, what am I committing to?
I dont see how corporations are held to anything but a higher expectation than individuals, not lower. Can you expand on this?
No, but that specific sentence you're quoting is targeting a very specific bit of business ethics teaching that I find great issue with. IME no one making decisions like layoffs really believes in the amorality of corporate decisions, except the morally bankrupt. You don't find solace in the idea that a company only exists to make money when you're telling a father whose kids are about to start college that he needs to look for a new job.
> Performance based compensation is absolutely standard for CEOs- Both in terms of options and stock grants.
Yes but you’re still making $1.5M after a 34% haircut. That seems like a reward, and not any real sense of taking responsibility when you have to let go 1 in 5. Wouldn’t it be better if he just got a base salary of 200K or something and no stocks for that year? He already has a bunch of equity and if he does well at the end of the year, that equity will be worth more anyway.
In what sense do you think it would be better? Would it advance CEO performance or the company? Would it bring the world more into alignment with some sense of moral justice?
It certainly would be some real accountability. They didn’t perform well and they’re mostly compensated in equity, so they get less of it. When they perform better, they’ll get more equity. Why wouldn’t this encourages the CEO perform better? The sword cuts both ways.
You are describing how the world already works. The only difference is base pay. Why do you think lower base pay is better accountability and performance? They already have millions on the line. I imagine better base pay means better candidates.
>Why do you think lower base pay is better accountability and performance?
it really doesn't matter. Because you don't just apply on linkedin and get interviewed for a CEO position like this. You're already a millionaire if you're being considered for a million dollar position. It can be charity work and I wouldn't care because you probably accrue money passively anyway.
>They already have millions on the line.
and if they fail they have millions left. oh no!
the outcome can be equal but the opportunity never was. And it's a real shame people with these safety nets actively work to erode the pittance of safety nets he government gives to people who make less than them in their careers than they do in a few months.
And who sets the standards? Their CEO-buddies on the boards. None of them would dare rock the boat.
One of the failure modes of 401ks and investment funds are large investment pools that don't vote at AGMs, leaving boards largely dominated by CxOs, to their own devices.
Either you dont understand my point, or I dont understand yours.
Im saying CEOs have financial skin in the game tied to company performance. They get less, often much less when the company shits the bed. This was in response to a parent post that seems to think CEO comp is entirely isolated from performance.
You probably didn't understand my point. You said CEOs are paid that way because it's the standard. In your opinion, who sets the standards for CEO compensation, and what are their day-jobs? The majority of boardmembers happen to be C-suite executives themselves.
My thesis is that the boards of public companies have been captured by the executives, and the diffuse shareholding has been ineffective in providing oversight to the boards at AGMs. If SWE (or teacher) remuneration were determined by a (nominally independent) subcommittee dominated by other SWEs (or teachers), I posit that incomes for that role would outstrip other roles at the same organization over multiple decades, due to biases and knowing who butters their bread. It would become standard practice, naturally.
Okay, I think we are both misunderstanding then. My original point was a fairly mundane one. Pixel was asking why CEOs don't suffer substantial financial cost for bad performance. My point was simply that they do! Poor performance often incurs millions of dollars of opportunity costs to CEOs. I suspect that the deeper question was why don't CEO suffer more than just opportunity cost, in harsher way that would be more emotionally satisfying.
You raise good questions about how prevailing compensation is set and the relative power of corporate governance. I tend to agree that executives have a lot of leverage and it seems like boards are relatively weak. They don't have a lot of incentive to pinch pennies push back on CEO compensation. There's a pretty huge cost to shareholders if they want to fire or even replace a CEO, and uncertain upside.
There might be some class/roll solidarity going on as you propose. However, I think the bigger factor is that minimizing CEO comp simply is not a priority for boards and shareholders, despite the attention it gets from outside critics.
Performance based compensation is absolutely standard for CEOs- Both in terms of options and stock grants.