Once again the corporate way of life dominates the headlines with little or no concern for the employees who are involved.
Capital expenditures have gone by the boards as any profit is used to buy back shares in order to boost the EPS and ultimately stock value. Dividends are raised by borrowing money, decimating balance sheets at artificially low interest rates, in order to once again raise share value.
The original strategy to increase profits used to be simply downsize people into the streets and listen for Wall Street to applaud.
Now that the stock buyback, in many instances, and dividend increases, have run their course it’s once again back to the pink slips.
Office Depot, the office supplies retailer, announced “better than expected” fiscal first quarter results. Wall Street applauded and sent the stock almost 17% higher after the announcement.
CEO Roland Smith decided to reward his employees and gave a hearty salute for a job well done. He gave each of them a choice of a one-time bonus or a few extra vacation days with pay.
THE PRECEEDING PARAGRAPH IS PURE BALONEY AND OF COURSE EMPLOYEE’S WISHFUL THINKING.
If Smith had done such a thing Wall Street would have had his head. The actual reason for Office Depot’s significant stock rise was not due just to a good quarter but to the company’s plans to shut at least 400 stores by the end of 2015.
“The move is expected to start to boost earnings” Smith proclaimed.
Of course it will. The company will no longer be saddled with 16,000 people (400 stores times 40 average employees per store). The same people who worked day in day out to create the “better than expected” returns the company enjoyed in the first quarter.
In the past companies were loyal to their employees and vise versa. Employees would be asked to hang in during the good times and the bad knowing full well that their job was secure, if the company was performing at “better than expected” levels. Now however it’s the tune that Wall Street plays that makes CEO Smith and others dance.
It’s all about share value and 40,000 people be damned.
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at email@example.com and on Twitter @tatroshow.