Blog entry by Olaoluwa Afolabi

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by Olaoluwa Afolabi - Saturday, 1 August 2020, 8:17 PM
Anyone in the world

During the Business Ethics discussions, I was faced with the current event in the business world during the pandemic. Pay cuts have become a tool for some companies to avoid layoffs. But I say some companies don't need to consider both because they can afford to stay afloat during the pandemic no matter how long it lasts, but they considered either of the two because they are greedy. I say "why can't a company making $500m before the pandemic and make $50m during the pandemic?" Greed is the problem with businesses. "Why can't companies burn Retained Earnings to make the company stay afloat?" It is apparent that ethics are significant issues everywhere in the world. The reason I said that is because it is all about PAT for some firms despite the fact that they can cope without layoffs and pay cuts for a good three years pandemic. In other words, some companies can afford to run the company during this trying time without reducing OPEX and laying off workers.

Yes, I do understand that not taking any reduction on OPEX could lead to bankruptcy, but we have financial accounting ratios for a reason. A firm can see how long they can stay afloat before they head for an axe. It is now also clear that some companies are not created based on continuity concern from the start go. They live by the day, and when problems arise such as a pandemic, they lay off workers to be able to scoop their greed even in a time like that. I have seen instances where investors refused to fund a company because the CEO/Owner pays himself too much for a company that barely scratch the floor. Investors said it would be tough to be sustainable from the financials he has presented. We have seen many levels of greed with a lot of organisations. Analysis has shown Access Bank can cope for some years without taking the step to layoff workers. To make it worse, this move by Access Bank is in a country where the government has no incentives for citizens out of a job. They can prove the government is not part of their organisational burden as to if the government is functional or not, but I think they can do better on their part. The pandemic season should be a time to show/prove loyalty to employees. I do not see anything terrible in having PAT lower than the previous year in a time like this. 

Let's for a minute assume firms did evaluate their financial ratios and see they may not be able to cope since it the normal thing to do, then I may support heading for an axe on the operational expense, but certainly not by layoffs. In such a case, it is okay for employees of a particular firm to share the pandemic burden with a pay cut. A no-layoffs policy builds loyalty. A pay cut can lead to a longer business runway for the company. But a layoff out of the box would be a massive hit on employee's morale. Among other things layoffs could cause, is employee attrition. Employees would start leaving because of job security. One thing is sure that when this season is gone, your move as a company becomes a perception of how the job market sees the company, and it will tell a lot on employing experience in the nearest future. 

I am partly in support of pay cuts if it is a choice, but I am not on the side of layoffs. Yet it is arguable some companies would have to do a layoff to remain afloat. If that is the case, make people see your analysis as to why layoff would be the best deal. The world and its citizens are depressed enough to make things worse out of greed to remain profitable at all cost.