As a recruiter who has placed people at many fortune 500 companies, I've seen first hand what corporations choose to prioritize in a recession. More than a year ago, the Coronavirus crisis ravaged the American economy, and ever since, Fortune 500 companies have been scrambling to protect their dividends and keep their shareholders happy. Merck, like many other corporations, has found itself needing to prioritize their dividend in order to preserve their reputation and shareholder confidence. When companies attempt to protect their dividend, it is often at the expense of workers' benefits and job security. This trend has affected companies in many different industries. Let’s take a look at some specific examples from AT&T and ExxonMobil.
Back in June of 2020, The Dallas Morning News reported that AT&T was planning a $6 billion job cost cutting initiative which would, “make ‘sizable’ job cuts and close hundreds of retail stores." This was obviously a response to the current economic downturn, but the plan was made with the goal of preserving their dividend. That same article reported that “AT&T has been under pressure to reduce costs, sell assets to help pay down debt, expand 5G wireless networks, raise its shareholder dividend, and expand its WarnerMedia entertainment offerings." The results have been several thousand job cuts and several hundred closed storefronts.
Last year, Reuters reported that Neil Chapman, ExxonMobil’s Senior Vice President, stated that the company would be cutting capital and operating expenses to protect their dividend. ExxonMobil had since announced that they would no longer be matching U.S. employees' contributions to their retirement savings plans. The suspension of these benefits officially began on October 1st, 2020. This has been but another step in a long line of troubling economic developments in which companies are attempting to save their dividend. According to Reuters, ExxonMobil has now experienced “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic." This announcement comes on the heels of several stories claiming that ExxonMobil was effectively laying people off through PIP. Last month, Reuters reported that ExxonMobil is set to reinstate their match contribution program, come October 1st, 2021.
A PIP or “Performance Improvement Plan” is essentially a severance offer to leave the company. According to Forbes, ExxonMobil made changes to their performance evaluation process in order to justify more job cuts. Back in April, they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers (Gross). Employees who were placed in the NSI category qualified for a PIP. ExxonMobil employs about 75,000 people, so an 8% reduction would result in about 6,000 people out of a job. According to Business Insider, the changes made to ExxonMobil’s employee evaluation process were an attempt to “cut more jobs without traditional layoffs."
All of these decisions are being made in the name of protecting dividends. ExxonMobil has raised the payout on their dividend annually for 37 straight years, and it is very much a streak they would like to continue. When corporations prioritize their dividend, the result is typically a lot of employees out of a job.
Sources:
Nichols, Ashton. “AT&T’s $6 Billion Cost-Cutting Plan Includes Job Cuts, Store Closings.” Dallas News, The Dallas Morning News, 16 June 2020, https://www.dallasnews.com/business/local-companies/2020/06/16/atts-6-billion-cost-cutting-plan-includes-retail-store-closings/.
The Retirement Group or www.theretirementgroup.com
Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020.
Jones, Benji. “Exxon Made Managers Dub Some Employees Poor Performers to Cut Staff – Business Insider.” Business Insider, Business Insider, 30 July 2020, https://www.businessinsider.com/exxon-managers-dub-some-employees-poor-performers-cut-staff-2020-7.
Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
Gross, Elana. “ExxonMobil Reportedly Changed Its Employee Review Process To Increase Performance-Related Job Cuts.” Forbes, 24 July 2020.
“Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
“ExxonMobil Corp. Layoffs – TheLayoff.Com.” TheLayoff.Com – Layoffs Discussion Board, 27 July 2020, https://www.thelayoff.com/exxon-mobil
Sklover, Alan. “‘My Severance Agreement Says I Can Never Re-Apply; Can I Get around That?’ – Sklover Working Wisdom.” Sklover Working Wisdom, 20 Mar. 2014, https://skloverworkingwisdom.com/my-severance-agreement-says-i-can-never-re-apply-can-i-get-around-that/.
“Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.
XOM Summary Plan Description, 2017
https://www.reuters.com/business/energy/exxon-plans-reinstate-employer-401k-match-oct-1-2021-07-02/
