Why should shareholders have all the fun?
P.S.: All my arguments are based on a generalised scenario and not the exceptions.
The great Mr. Ratan Tata recently said in an interview “The initial tendency when the virus hit (was) lay off people, thousands of people. Is that going to solve your problem? I don’t think it is, that’s the knee-jerk reaction that you had from the traditional workplace, lay off people because the business is gone. But you have a responsibility to those people,”
We have been hearing since last few weeks of lockdown that many people have lost their jobs and many are on the verge of losing it on the backdrop of this pandemic situation. Why has this situation arisen in the first to place to fire an employee? Mainly because, since many years the employees are seen as soft targets by most of the organisations. Whereas during the good times, hardly few companies give the credit to the stakeholder named employees, during the challenging times, it is the employees, whose pay is cut first and if required their job too. Why shouldn’t the owners i.e. the general shareholders feel the heat too?
Afterall, the shareholders invest in a company after fully understanding that the ultimate risk lies on them. They get a premium too for the same over the debt holders. The reserves of the company are called so because of the purpose they are kept aside. Why can’t the reserves be utilised for paying the salaries (at least part of it) of the employees during situations like this? This is not going to be an everlasting situation anyway. The savings of the company are kept there to be utilised in the situations of uncertainty, during the extraordinary times of pandemic, recession, depression etc. and not merely to increase the valuations of the company. What portion of the corporate sector ‘share’ their ‘profits’ with the employees, for the employees are the backbone of any working system? Only the Board of Directors and the C-level managers cannot run the businesses with their PPTs. They need employees too to execute their paper plans on ground.
Whereas majority of the employees do run their houses basis the bank account credit messages they get at the end of the month, a common shareholder doesn’t depend on monthly income from appreciation of his shares. If you take away a job from somebody or even a part of their salary suddenly, it may affect their basic survival. But if the value the shares fall down for some time, the shareholder will wait for that period for the share price to go, because he/she doesn’t sell particular quantity of shares every month and bring the grocery home.
The managements these days want to please its investors and there is nothing wrong in it. The problem lies where they are concerned only about them (the investors) and not the other stakeholders of the company be it employees or suppliers or customers. Except investors, all others (sometimes the regulators too) are taken for granted. The reason may be that the investors (but not the other stake owners) can decide the very existence of the top people in the company. Another reason may be that the others are a bit unorganised as compared to the investor fraternity. Obviously this kind of practice does not last for long. Some or the other day this practice will collapse, but not before causing an irreparable loss to the careers of many. Therefore, it’s high time the employees along with other participants of the ecosystem be taken seriously and treated respectfully. Hope the situation around us improves soon and a balanced working environment gets established all over!
Bipin Palande