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Should CEOs be rewarded for laying off their workers?
By Lauren | September 1, 2010
MSNBC reports today that CEOs who laid off more workers than average raked in more money than their peers. According to a new report issued by the Institute on Policy Studies, the fifty CEOs who led the charge on laying off rank-and-file employees during the recent economic turndown received $12 million on average in 2009, as opposed to the mere $8.5 million average compensation that CEOs of S&P 500 corporations received. (Gosh, can you imagine having to live on less than $9 million a year? What a hardship!) Each of the top fifty companies surveyed laid off 3,000 workers or more from November 2008 to April 2010. In other words, more than 150,000 people lost their jobs while their top bosses made a stunning 145% of the already lavish average salaries that S&P 500 CEOs receive.
Something just isn’t right here.
MSNBC quotes Sarah Anderson, lead author of the Institute’s report, as saying that “‘CEOs are squeezing workers to boost short-term profits and fatten their own paychecks.’” Put the emphasis on short-term. Unemployed people don’t buy goods and services they can’t afford, so companies that lay off their workers to boost already outrageous CEO salaries are ultimately destroying their own consumer base. Something’s got to give and, eventually, this kind of short-sighted, selfish thinking will do real damage to the American marketplace.
Here’s my question: where are the Boards of Directors of these companies? Don’t they recognize that laying off skilled workers may reduce short-term costs, but limits a company’s ability to grow when the economy improves? Don’t they know that the economy really can’t improve as long as unemployment lingers near 10%? And aren’t they even slightly concerned for the well-being of employees who’ve have transformed CEOs’ grand visions into practical realities? The MSNBC article focuses on Hewlitt-Packard’s former CEO, Mark Hurd, who cut 6,400 jobs from his company in 2009, only to step down this year in the face of allegations that he’d sexually harrassed a female contractor. Hurd’s severance package is estimated to be as much as $40 million, or a litle over $6,000 for every employee he fired. I’ll bet a lot of displaced HP workers can think of better ways to spend that money, and that a lot of them are at least as deserving of it as Hurd.
Don’t get me wrong; talented executives deserve fair compensation, and keeping costs down is often one of a CEO’s most important responsibilities. But I believe that Boards of Directors shouldn’t rubber-stamp huge compensation packages for CEOs who cut costs by savaging their other employees. Companies are supposed to produce goods and services; it’s tough to do that when an overpaid CEO is the last employee in the building.
Topics: Business Ethics, Corporate Governance, Social Ethics, corporate responsibility, ethics |