Are corporations just feeding the recession beast?
The article on MSN about Starbucks closing 300 stores and laying off 6700 employees really burns me.
Why? Because they are adding to the recession by firing employees and closing stores solely because their Net Income has dropped… not because they had a loss… and just because it wasn’t as big as Wall Street wanted it to be.
They still paid all their bills and made a profit! There is no need to close the stores and fire the employees unless the individual store is no longer generating a profit. Starbucks isn’t the only one… lots of companies are doing the same thing. Disney, Microsoft, to name two of them.
All this does is make the recession worse!
Business is cyclical. You have good years and you have bad years. We’re in a bad year. If you want to end the cycles quicker you don’t go firing your help unless you are actually losing money. You keep them employed so they can keep buying lunch at McDonalds so that McDonalds can make money to buy your widget.
The idea that you must always show as much profit in bad years as you do in the good years is just plain stupid. As long as you can pay your bills and not lose money you are ahead.
My father used to look at the annual financials of a business and if it showed even $1 more than last year it was a good year.
All they keep doing is feeding the beast…
Photo credit: stock.xchng.
I was just about to write a post on how I think companies are cutting people just for the sake of cleaning house and blaming it on the recession.
Fabulously Broke in the City
“Just a girl trying to find a balance between being a Shopaholic and a Saver.“
Great post and great comment.
Unfortunately, when the SEC and the IRS changed the rules on executive pay in the 90s, they created huge incentives for executives to do whatever it takes to get the price high in the short run. Senior management has no interest in the long-term financial health of a company. They are only interested in the short term stock price to make their millions of stock option worth as much as possible.
As Fab Broke pointed out, companies often take a recession as an opportunity to make large layoffs of poorly preforming employees, sections, stores. They can hide behind the business downturn to take huge tax writeoffs that they otherwise wouldn’t have.
Want to know what burns me up even more about Starbucks? They move into neighborhoods and force independent coffeehouses out of business. And know they’re just closing up shop. Yeah. Real classy. Of course I’m headed to Satrbucks right now for my skinny vanilla latte. What can I say? I have an addiction!
I’d love to see a national discussion about local vs. corporate businesses. Starbucks has no problem shutting down stores if they don’t return 17% annual growth rates (and how realistic is that over the long term?). A local business owner isn’t going to close up shop just because profits are down a bit. Most small business owners are happy to pay the bills at the office and at home and aren’t demanding corporate jets and million dollar getaways.
Perhaps the Chamber of Commerce organization can start the conversation?