Yahoo Profits are Symbol of Broken System
According to Tech Crunch, Internet giant Yahoo tripled its profits this quarter, boosting its income by $130 million.
As a share holder, you'd be pretty pleased, and as part of management, the picture is decidedly better than it was last year when its share price plummeted after it rejected an offer from Microsoft.
However, if you worked for Yahoo, you probably lost your job.
It turns out, Yahoo's profits are based almost entirely on the $169 million cost cutting measures it took (2400 workers were let go), while of course protecting corporate bonuses. According to the San Fransisco Business Times, new CEO Carol Bartz was paid a $1 million salary with a possible $2 million bonus. She was also paid an "annual equity grant" of $8 million and is eligible for a "make-up grant" worth $10 million, a quarter of which is paid in cash.
Those millions of dollars going to Bartz's third and fourth vacation homes could have been used to save hundreds of jobs. But it wasn't, and those people must now find their way in the worst jobs market in 80 years.
This isn't a hit piece on Bartz -- she probably worked extremely hard to get where she is, and deserves to be paid well for her services.
The problem is the system that allows such massive discrepancies in earnings and puts profits before people. The sad fact is that Yahoo was still profitable before it made the cuts, bringing in a net profit of $54 million in the same quarter last year. Profits were down, but given the atrocious state of the economy, it was to be expected.
A corporations sole aim is to maximize profit for its share holders. It is legally bound to deliver those profits, and a structure is in place ensure it does so regardless of the economic times. Yahoo did what was necessary to deliver those profits by stripping away its work force, revealing the ugly truth behind the modern corporate system:
A company has no duty is not to its employees. It has a duty to profit.
Why do we accept living in a society that treats us like expendable cogs in a wheel? That sacrifices families for the sake of executive bonuses?
You can spend decades building a company, pouring your life and soul into it only to be 'let go' when management can find someone cheaper. Our brightest students are taught that this 'efficiency' in business is good - that profit trumps all, that people are expendable and can be replaced. But those people are our neighbors, our friends, and our families. It is an external cost that business school does not account for.
It is insane that we accept this as a fact of life, because really, it is evil.
Ben Cohen is the Editor of TheDailyBanter.com and founder of BanterMediaGroup.com
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Yahoo needs a UNION
having a union would not prevent Yahoo from laying off workers...
I remember times, when businesses made money, the boss made a good paycheck and the employees made a living, everyone was satisfied. Yes, then wages became stagnant, people looked for cheaper items and Walmart was born. When I see those self-serve check out centers in stores
I wonder why people use them? What will they do if they are looking for a job? Refer them to the self-serve checkout counter?
good points except self serve checkout counters. they are efficient means of service. have a few checkout people for large number of items and self checkout for small number of items.
Now you are going to say that ATM's are bad because they replaced to a large extent the bank tellers !!
there is no reason to have tellers to just withdraw cash. depositing checks & and some other work maybe. but just for withdrawing cash, ATM is perfect.
technology doesnt mean there wont be displacement. !!
This is why we need strong unions. And also unions for white collar workers. And enforced labor laws.
I am sick and tired of people blaming shareholders.
Shareholders are the OWNERS of the company, employees are well...emp
If you want a company to not listen to (or care for) its shareholders then make laws that prevent companies to go out there in equity markets and raise capital.
The companies should be PROHIBITED from raising capital from shareholders. well you cant do that for existing companies who already are publicly listed. You can do that for next generation of companies.
problem solved !!
until then, the companies should exist for the sole benefit of shareholders.
"This isn't a hit piece on Bartz -- she probably worked extremely hard to get where she is, and deserves to be paid well for her services."
It has nothing to do with how hard one works. There is no rational basis for CEOs making 400 times the least paid worker. Without the employees at the bottom doing the work the rock-star aristocracy of CEO would not have a job regardless of how hard they work. It seems there is a culture of entitlement from the executive class that they deserve such huge salaries. In most cases they do not especially whent the hurt the company's long term health for sake of short term balance sheet performance and massive bonuses. From what I can tell Bartz is a two bit "Chainsaw" Al Dunlap.
I always said that stock markets are evil. You can only drive up your profits so much. You can
only have so much productivity. Without employees you would not have anything yet they get treated like dirt. So if the productivity factor is maxed out, what is next, buying up another company,
well that should be illegal because after a while you do away with competition and you have a monopoly. Then after you buy up your competition, what is next???? How did the stock market ever survive back in the days before everyone got so greedy. People complain they get no customer service, well, how does one get customer service when one has to cut manhours?
Remember Terry Semel walked away with about 500 million for his time there.
Gotta love google ads....
http://img
what I got the first time I read the article.
Oh, and I missed the last half of that comment.
Public companies tend to outcompete private companies, especially smaller private companies, because public companies really are more efficient and competitive - generally because they are bigger, infused with larger sums of capital which enable them to get competitive advantages (think Walmart, applied to many different scales).
And, as supercorporations slowly reallocate wealth from everyone else to the rich, the number of small privately-owned businesses drop because nobody has the leverage to start them. Instead, they're broke and inundated in debt just getting a college degree, left with no tools for entrepreneurial leverage except starting a public company using capital from the wealthy.
Wrong on almost all counts.
Small companies tend to outperform their larger brethren because of a tighter focus on business, easier to take innovation to market, less over head, a ton of reasons. Sure there are a few Wal Mart examples, but there are many, many more examples of where small companies out innovated larger entities and destroyed them. Wang word processors, destroy typewriters, in turn, destroyed by PCs, etc.
We actually have a very efficient system of forming companies in the U.S., and it is one of our great advantages - Venture Capital. Job creation through VC funding over the last few decades has been extraordinary.
Yes, exceptional circumstances such as strong technological innovations can allow the little guys a chance against the big guys. This is not the trend for the market, however - the trend for the market is for large companies to accumulate immense intellectual property and, if not use it for a competitive advantage, to simply sit on it to ensure that nobody else does.
And the job market in the US for the last few decades has been exceptional - but not in a good way. All those posts on this website about how real wages have not meaningfully increased for most of America for decades, and how over the past ten years the job market has in fact generated successively worse employment, leaving many 'under-employed'?
Thanks a bunch, venture capitalism.
Steve - no, making a profit from firing workers does not in and of itself call into question their value.
If you budget for paying a worker for a year, then fire them, then you've freed up a year's wages worth of liquidity - which you can then post on your books as putting you that much into the black. It's essentially a form of liquidation, where liquidation is the "human" resource.
Sure, you may have ended up crippling your company's ability to continue generating value in the long-term, but that's irrelevant. The shareholders want their returns.
Yep, I always said pretty soon we just have the customers open the front door and throw in their money for we have no employees anymore to wait on them LOL.
If the company fired 2,400, yet increased profits, doesn't that call into the question the value that those employees were creating? BTW, what system are we criticizing here? If we all wanted to invest our 401(k)'s into companies that were overstaffed and unworried about profits, then we would. But, we don't. Funny how we all complain about Wal Mart business practices, yet buy all of our food there. We complain about companies that abuse the environment, yet "green" funds are largely ignored by investors. Why? Because when you invest your savings so that you can retire, you care about rate of return (primarily).
Nothing forces companies to go public and have shareholders that are focused on profits. There are plenty of small and mid-size companies that are privately owned and are willing to forego profit maximization because they feel an obligation to their employees. But, it is a dying breed. Why? Probably because, as drymartini1 suggests, the employees don't reciprocate that sense of obligation to their employers.
I too failue to realize why corporate employees have low morale. They deserve to be treated like dirt, why aren't they more appreciative of it?
Steve, I think you are way off the mark here. You are arguing that downsizing is somehow the fault of the worker. It's a pretty inhumane way to look at it. The fact is, corporations often shed people when they don't need to in order to make profits. These are people with families who rely on their paycheck to survive. I know plenty of people dedicated to their companies who were laid off because of cut backs. Interestingly, their bosses never took a pay cut.
This type of 'efficiency' has effectively destroyed the middle class in America and has driven wages down to a level where people simply cannot survive on them. You bring up WalMart - a classic case were their business model has driven local stores out with their rock bottom prices, and forced people to work there for lower wages. They import most of their good from China (which is much cheaper), so also drive factories out of business. Why you think this is a good thing is beyond me.
Probably because he is benefiting from the system as is.
Sounds like you have never worked for a big company before. What they tend to do is cut their employees and then force the remaining employees to do the work of the employees that were just let go. This affects the morale of the remaining employees which in turn affects the customers of that company. So now instead of waiting 10 minutes to speak to a customer service representative the customer is waiting 60 minutes. The balance sheet looks good bcz you have cut your expenses and for the time being you have not realized a drop in revenue. Eventually your customers start leaving you bcz they are tired of waiting an hour at a time to speak to you and then your spending millions of dollars trying to get them back. So in the end you fire 2400 employees who prbly were customers of yours and bcz you dont have enough people to service your regular customers you lose them too. What is next? Cutting more employees so our earnings look good?
You took the words right out of my mouth! I have seen this.
"the employees don't reciptrocate that sense of obligation to their employers"
That's rich, and totally otu of touch with today's job market - reciprocation - implies that the company is providing some sort of obigation to their employees; maybe job security, good benefits, pleasant work environment.
In that regards companies gave up on their traditional social and ethical commitment to the employer/employee contract years ago.
Well, when your economy is founded and built upon the principle of greed (economists call it 'self-interest'), it can hardly be surprising that everyone is encouraged to be greedy.
No man can serve two masters, etc.
nobody pours their heart and soul to any company !! what decade you living in?
employees work at a company because of the paycheck that is highest at the moment and will leave that company for next when the offer arrives !! thats all.
quid pro quo
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