In Takeovers, Human Toll Is Often Ignored
Takeovers have been dominating the news for some time. There’s hardly a major company that isn’t facing one, launching one or restructuring to head one off. Stories examine the impact on stock prices, profits and markets, but they don’t often examine what all the activity is doing to people.
Consider the young fellow who had worked hard and finally won promotion to manager of a Gemco store. He’s now unemployed because Lucky, under threat from takeover artist Asher B. Edelman, believed that it no longer had the time to spruce up its Gemco chain and get it healthy. It closed the chain, and the young manager is now out of a job.
Or consider the longtime public affairs director of a medium-size food company that boasted of treating its employees “like family.” The company was sold, and an incredibly insensitive male boss told her she was fired but not to worry, she could always stay home and get pregnant. “That’s not acting like family,” she says.
The insensitivity is not so unusual. In case after case, companies find it easier to consider the financials of the deal than the toll on human beings. Even companies with reputations for being concerned about providing good career opportunities become subject to sudden indiscriminate head-chopping. It happens, in fact, whether they win or lose in the takeover game.
A recent example is Goodyear, which beat back a challenge from Sir James Goldsmith, only to be forced by the cost of buying back its own stock to restructure the company much as Goldsmith wanted. There’s no telling how many jobs will be affected in the process.
Restructuring Is Important
Restructuring is, of course, an important part of keeping a corporation healthy, or it would be if it were done rationally and with adequate consideration. That is not the form that restructuring is taking in many cases today. Takeover mania is so rampant that companies are abandoning sensible long-term growth strategies to meet the needs of the moment.
It is a practice with a hidden long-term cost. Even in this age of electronic marvels, it is still people who make companies go, the people who punch the factory time clocks and staff the computer terminals as well as those who run the show. To see a revolving door of ownership and wholesale job losses around them has to affect the feelings of loyalty that employees have toward a company. In fact, anyone interested in joining any major company these days has to be thinking less about a career commitment and more about keeping other options open.
“There is a good deal of evidence that people in an organization . . . will accept even the most painful adjustment, such as the closing of a business or the sale of parts of it, if the rationale is economic performance or the lack thereof,” Claremont Graduate School Prof. Peter Drucker writes in his latest book, “The Frontiers of Management.”
In the case of takeovers, however, Drucker adds, “the only rationale is to enrich somebody who has nothing to do with the performance of the enterprise and who, quite admittedly, has not the slightest interest in it. And this goes against the grain of employees who feel that the hostile takeover treats them as ‘chattel’ and not as a ‘resource,’ let alone as human beings.”
In terms of public policy, this hurried buying and selling of companies and parts of companies like so many Monopoly properties has not been adequately explored. Congress finally is taking an interest in the mania but mostly as it relates to stock trading, takeover tactics and defenses thrown up by management to keep its jobs. What is badly needed is a look at the rights of the work force.
One of those is the implied right, once employed, not to be fired for unjust cause. Courts only recently have been restricting employers’ ability to fire at will, but such protection is long overdue and could well be extended to takeover situations.
Corporate raiders think of a company’s worth not as a “going concern” but as an entity to be broken up and sold. Yet a company has an obligation to keep itself in operation and to maintain a commitment to the people it hired and on whose loyalty it relies.
