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Opinion: Wage Subsidy redundancies sting, but shouldn’t surprise

Gerard Hehir, National Secretary of the Unite Union, says job cuts at big companies in the post-Covid world are – as usual – all about profits and shareholders.

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More than 1000 jobs are likely to go, the company conceded on the day before the Government’s Alert Level 1 announcement. Source: 1 NEWS

Hearing the Prime Minister castigate the Warehouse for laying off 1,000 workers after receiving $52 million in wage subsidies reminds me of the fabled frog who agreed to carry a scorpion across a river. The scorpion stings the frog halfway across, dooming both to drown. The frog cries “Why on earth did you do that?” The scorpion replies: “I could not help myself. It is my nature.”

When it comes to large corporations there is one rule, one goal, one objective that defines their true nature. Not the mishmash of feel-good buzzwords that are corporate “vision statements” (new 2020 editions now with added extra Black Lives Matter), but rather the fundamental driver for corporate decision-makers.

The Prime Minister could simply look at the Warehouse Group’s self-declared primary objective: “To create, and to continue to build, sustainable value for shareholders”. Value for shareholders means profits and share price. Profits would be enhanced if 1,000 employees lost their jobs. That is their nature.

The Prime Minister quite rightly compared the Warehouse’s actions with many small businesses which are doing all they can to save jobs despite massive financial headwinds.

We shouldn’t get too teary-eyed about altruistic small businesses – the very worst employers are also usually small businesses – but the differences between corporations and small businesses are crucial when it comes to redundancies.

Firstly, for small business owners, “jobs” are people you have worked alongside, whose partners and children you know and who may have shared their hopes and dreams with you.

Secondly, and crucially, the people doing the sacking are the shareholders themselves. Small business owners can trade off “value for shareholders” for other values – human ones like allowing people to stay in their homes and feed their families.

Corporate executives and directors, on the other hand, effectively answer to the share market. A company’s share price will often rise when redundancies are announced (Yay! – costs are going down).

As a metric of reality, the sharemarket is deeply flawed and getting worse.  Even hardened free-marketeers are shaking their heads at how markets are blissfully ignoring cataclysmic global economic forecasts, just as long as governments keep pumping cash to them.

That modern corporate executives are desperate not to be seen (or see themselves) as inhuman profit-driven drones makes no difference. They can ditch the tie, wear jeans to work and cook sausages at the staff social club BBQ as often as they like, but their primary objective remains the same.

There are multiple layers of corporate rules, conventions and structures to make sure, when push comes to shove, they will do the shoving required to enhance value for shareholders.

That’s the real price of the new Audi, the annual family ski holiday to Canada and the Wanaka holiday home. As any ruthless regime knows, you always look after those who wield the knives, lest they be turned on you.

Rob Campbell, the Chair of the SkyCity board, honestly spelt out the brutal realities in the thinking behind sacking workers.  He quite rightly criticises companies who claim their main purpose is to provide jobs, when in reality “The jobs follow the investment and trading decisions.” 

An old favourite at pickets and protests is the “People before Profit” placard. The corporate equivalent is “Profits before People”.

However, Campbell tries to make us all into scorpions: “This is not a particularly capitalist phenomenon. Government agencies, charities, churches and unions all adapt their job numbers to the funding available.”

Yeah, Nah. There is a big difference between making decisions needed to keep a business or organisation afloat and decisions made simply to maintain profits.

Neither the Warehouse nor SkyCity needed to sack the numbers of workers they did to just survive. Unlike the small businesses the Prime Minister was talking about, both SkyCity and the Warehouse are very profitable and have considerable financial reserves.

Redundancies may have eventually become necessary, but these sackings were not about survival.

SkyCity actually turned down government subsidies so they could sack some workers early on, rather than keep them employed for another 12 weeks. 

Why? No doubt there is a spreadsheet sitting somewhere in the company servers that looked at various scenarios and concluded that going early and going hard on sackings would enhance shareholder value.

You can have all the corporate social responsibility schemes you like (and both SkyCity and The Warehouse’s annual reports are dripping with them), but it will not change the bottom line. In fact “corporate responsibility” is all about the bottom line.

Instant global communications can no longer be controlled with a quiet word in Rupert Murdoch’s ear, and having your corporate brand directly linked to child slavery, drowning polar bears or migrant workers paid $5 an hour are very real threats to shareholder value.

Greenwashing has now been expanded to the whole rainbow with, literally, the addition of black to many brand palettes in the last month.

Corporate responsibility programmes will often have positive effects, but it isn’t unusual for a corporation to spend more promoting their good deeds than they spend doing them. I’ve yet to see an example of a corporation secretly spending money to do good just for the sake of it – the sort of thing ordinary people do every day.

If you feel characterising corporations as scorpions is a bit harsh, then think about this. At the start of the lockdown many corporations pushed hard to be declared “essential” and keep the profits flowing.

Dominoes Pizza even offered to deliver free pizzas to old people if they could keep operating (a very bad idea in hindsight). There were many more clearly non-essential businesses who tried it on, including The Warehouse itself.

If they had succeeded, their competitors would have almost certainly have followed suit. It is their nature.

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Dallas Pendergrast says the Government is out of touch with the reality of the pandemic for business owners. Source: 1 NEWS

Then there was Glenfield mall owner Dallas Pendergrast, who raged on TV news that malls would remain closed under Level 3. In hindsight (and looking at the US disaster in progress) those views were madness, but even at the time the vast majority of Kiwis knew better and, thankfully, so did our government.

Just as the scorpion’s nature doomed itself as well as the frog, the relentless pursuit of short-term profits is actually against business interests as well.

Ms Pendergrast should be invited to sell up and buy a mall in Arizona, Florida, Sweden or Melbourne. There will be bargains to be had and she can reap the rewards of the policies she demanded.

So, Prime Minister, your government removed the scorpion’s sting to save our lives.

Next time the scorpions want another free ride from taxpayers to “save jobs”, don’t get angry, just know that you have to remove the sting first, to save both scorpions and frogs alike.

This opinion piece was first published by Victoria University’s The Democracy Project and is republished with permission.