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Whenever a company starts doing badly, it seems as if their first response is to lay off those at the bottom or severely cut benefits/pay. Could it be anymore backwards? If those at the top make stupid decisions - which they do all the time, why aren't they the ones to suffer the most? Seems like the higher you are the most you should fall when things start going south.
Say for example a business starts doing horrible, instead of laying off those at the bottom why not make everyone from the CEO to the other executives endure a severe salary decrease? This is one area where I think Japan does a better job. As an example Nintendo started losing lots of money a few years ago due to bad sells from their next system, the President instead of laying people off took a 50% pay cut. It seems as if in Japan those at the top are more likely to be held accountable and if you screw up they are the ones that must pay the price, not your average joe.
It may be wishful thinking but it would certainly be nice of instead of "Who can we lay off" the default option was "We all need to cut our big fat salaries in half, if not more and get rid of or severely cut any bonuses we get".
Companies falter for many reasons. Some are due to bad/risky decisions, and some are simply due to market changes. Changes at the top happens all the time. Layoffs etc. are just one option. These things don't happen in a vacuum. This isn't to say it doesn't happen, but the correlation isn't as direct as indicated.
As for salary decrease for executives. Most of them have incentives that are tied directly to the performance of the company. And some aren't even paid in salary (the fact that they can take such an arrangement is a different conversation). So in a way, they are getting a salary decrease.
Of course, Vision's comment is also correct. In companies where the true stakeholders are the top, it's unlikely the owners are going to fire him/herself.
Whenever a company starts doing badly, it seems as if their first response is to lay off those at the bottom or severely cut benefits/pay.
Such moves make sense when the company is doing badly specifically because of shareholder concerns about excessive expense, what's sometimes referred to as the "middle line" concerns (in the context of the "top line" meaning revenue and the "bottom line" meaning profits). In such cases, even if it made sense (and it doesn't) to cut the executives' salaries, it generally wouldn't make a big enough dent in expenses. The company cannot tell landlords they're going to pay less rent than leases state, they cannot tell customers that they are going to increase prices beyond what existing contracts provide for or, for that matter, what the market is willing to pay. Sometimes, the only way to address the critical problem is by reducing the number of employees and/or how much they're getting paid. And that's going to be more and more often the most effective means of addressing middle line problems as the US labor marketplace becomes more consistently and more substantially an employers' market due to the impact of automation and globalization.
Quote:
Originally Posted by Kicks45
Could it be anymore backwards? If those at the top make stupid decisions - which they do all the time, why aren't they the ones to suffer the most?
While executives do make bad decisions sometimes, they do so far less often than random anonymous pundits on the Internet claim, and their decisions are far less the cause of what goes wrong than random anonymous pundits on the Internet claim. Generally, especially in publicly-owned companies, executives have demonstrated capabilities that, if left to their own devices, given the flexibility and resources they need, and barring unforeseen categorical impediments to success, will pay dividends for the company far in excess of their outrageous compensation packages. As such, they generally have a lot of leeway in terms of determining how to respond to problems.
Quote:
Originally Posted by Kicks45
Seems like the higher you are the most you should fall when things start going south.
I recently explained some of the reasons why that assumption is not reasonable:
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Originally Posted by bUU
... more often than otherwise, when things go south, either [a] it is the result of normal variation of performance and the vagaries of the marketplace, and investors are arrogant and vindictive cretins who need their pound of flesh when they don't get the quarterly results they demand, [b] it is the result of the shareholders being unwilling to authorize the kind of widespread changes that the CEO wants to implement, or [c] the executive made mistakes, but the shareholders operate in an environment within which they can act without accountability for the draconian nature of the sanction that they would impose. Like many other things it boils down to the nature of the individual in society who cannot control their blood thirst impulse.
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When a business is failing, in most cases they can get by with fewer workers, since they don't have as much work for them. Reducing the pay of upper management will simply result in them leaving, and despite their failures, the company still needs them to manage the rest of the workers. Often the CEO is replaced, with the new person brought in specifically to turn around the financial situation, and they often will replace many of the upper management with their own people.
While executives do make bad decisions sometimes, they do so far less often than random anonymous pundits on the Internet claim, and their decisions are far less the cause of what goes wrong than random anonymous pundits on the Internet claim. Generally, especially in publicly-owned companies, executives have demonstrated capabilities that, if left to their own devices, given the flexibility and resources they need, and barring unforeseen categorical impediments to success, will pay dividends for the company far in excess of their outrageous compensation packages. As such, they generally have a lot of leeway in terms of determining how to respond to problems.:
Hook, line, and sinker right up to the reel.
Employees "have demonstrated capabilities that, if left to their own devices, given the flexibility and resources they need, and barring unforeseen categorical impediments to success, will pay dividends for the company far in excess of their" minor "compensation packages. " (Fixed it for you.)
I'll tell you what just give all workers the same agreements executives get. Multi year contract at ludicrous pay rates. If you succeed, you get double. If you screw up so badly you get fired, you still get the full payout of your contract. Yep most workers would love to have all those conditions for management.
No, you changed my description of the reality to fit your preferred narrative. The fact that employees know how to do their jobs properly doesn't mean that cutting staff or cutting compensation isn't the right decision for the company under the circumstances I outlined. Blinding yourself to the realities doesn't help you understand things better - quite the opposite.
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Originally Posted by tnff
I'll tell you what
Bargaining is the third stage of grief. Next, you'll need to be depressed, then you can reach acceptance of the reality that we all face.
They'll layoff the people who make the MOST compared to their value.
So, people at the very, very bottom will not typically get laid off because they are cheap labor. They may get let go due to performance it is labeled a layoff, but that is something different.
High salaries + mediocre production = First to go
The reason they don't lay off non-performing high earning workers at SOME companies is simple. Nepotism.
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