When is enough, enough?
DEBATE: Paradoxically, in the same breath as top management presents end-year results with surging profits, they too announce the need to continue to cut costs by firing a substantial number of staff. What’s the logic?
Some of the biggest, and strongest, Nordic financial corporations have an almost overwhelming 2012 profit. By spending less than one year’s profit, Nordea for example, could pay for a new Øresundsbron – in cash – and still have enough left over to pay the annual wage of 4000 employees. That is if their annual wages were roughly 1 000 000 SEK. Something only a minority receive.
Fair enough, Nordea is in a league of its own right now in profits margins, but the other large Nordic companies are doing well too, pocketing profits in the billions. Fine. Good. Strong financial corporations are needed for creating a sense of trust in the markets thus aiding a more positive market development in general. We, as employees and consumers, need a positive market. For job creation, supply and demand, and growth.
But, and there always is a but. Why would a corporation that is pocketing more than 26 000 000 000 SEK, want to announce to the market a further 10% staff reduction on top of the 10-15% they already have fired?
If they have a “need” to cut costs, someone out there must be saying to them that their profit isn’t high enough. Someone must be wanting more.
There are three key questions that need to be asked here.
The first question is why did Nordea (and other corporations for that sake) actually announce the layoffs to the market? Obviously management felt the need to send a strong signal to the market that action was being taken. They do so in order to boost the value of the shares. However, in all probability, staff reduction of this size would have occurred naturally over the next couple of years through pensioning and ordinary staff turnovers. Why then risk uncertainty, unease and a consequent divide between management and employees within the bank?
The second is: what are the long-term effects of this demand for dazzling short-term profits and pumped share value? We learnt from the dot.com crash how quickly pumped steroid muscles, so to speak, are less sustainable and healthy than ones built on long-term training. They can burst.
And the third question is: Why o why are some of our Nordic governments, even center-left coalitions, considering increasing the tax on wages in the banks thus spurring more layoffs, higher unemployment and greater costs for the state itself? They too are falling for short-term populism. And they are horribly wrong.
In sum, we must question the sustainability of what is going on. What will the long-term effects of all of this short-termism be? What alternatives to the current trends exist? Are these enormous profits benefitting the majority or the few? And we must ultimately ask; when is enough profit, enough?