Verizon has chosen not to layoff employees during the pandemic. However, Verizon was already planning to cut $10 billion in spending by 2021. This plan was put in place before the pandemic hit. It’s hard to believe they’ve been able to keep all their workers on payroll and continue to cut costs. Without using traditional layoffs & instead opting for a large retraining program, Verizon will need to find other ways to trim their budget during the economic downturn brought on by the Coronavirus. Keep in mind Verizon has cut employee benefits in the past, for instance in 2005 they froze the employee pension plan. This begs the question, what will Verizon do to save the dividend in 2021?
Fortune 500 companies have been scrambling to protect their dividends and keep their shareholders happy. The results have been generally negative for workers at those companies. 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”. Also having added a large merger debt to its Balance Sheet, the company has cut thousands of U.S. jobs through the pandemic. This is obviously a response to the current economic downturn but the plan was made with the goal of preserving the dividend, declared at $0.52 per share this last June 25th. The Dallas Morning News also reported that, “AT&T has been under pressure to reduce costs and 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.
This Last Quarter, ExxonMobil led the Oil industry, reporting second quarter earnings of $4.7 billion, outperforming Chevron. Even though the Oil giant faced giant losses in 2020, it now recovers and heads in the right direction through the third quarter. The company finds itself surrounded by largely positive media coverage, as Reuters reports ExxonMobil will restart employee retirement plan contributions come Oct. 1st, and Common stock dividends stand at 6.04%. After having experiencing its first back-to-back quarterly loss in over 36 years & cutting thousands of jobs last year, the company now prepares to meet the growing oil demand and protect its dividend, through measures such as limiting their capital spending, per The Business Report.
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 of 2020, they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers. 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:
- Business, Matt Egan, CNN. “Verizon’s Alternative to Layoffs: Retraining 20,000 Workers – CNN.” CNN, CNN, 14 July 2020, https://www.cnn.com/2020/07/14/business/verizon-jobs-ceo-hans-vestberg/index.html.
- “The Retirement/Transition Guide for Verizon Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://telecom.theretirementgroup.com/verizon-educate
- Noe, Eric. “After Verizon, Are Pension Freezes on the Way? – ABC News.” ABC News, ABC News, 16 Dec. 2005, https://abcnews.go.com/Business/story?id=1378711.
- 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/.
- 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/
- https://www.businessreport.com/industry/exxonmobil-reports-4-7b-quarterly-profit-but-doesnt-plan-to-boost-spending
