Saturday, December 6, 2014

CEOs, Layoffs, Gambling, and Greed

This isn’t just about the changing world of gambling, but it’s just one industry of many that seems to be going through another metamorphosis that I’ve seen far too often in my lifetime.  I read about the potential bankruptcy of Caesars Entertainment (they’re $25 billion debt), and how that will change the face of Las Vegas (and much of the US’s gambling industry, too).  Of course, Atlantic City has had its share of closures (FOUR!) in 2014 (and Trump Taj Mahal still to come), and elsewhere it seems you read about expansion of gambling here and then the closing (or layoffs) of gambling there.

There is one bright spot in all of this.  We’ll get to that in a moment.

First, full disclosure.  I’ve owned a business for 14 years.  A small business (you’d call it “Mom & Pop” – hardly even a small business).  I have also been involved in other businesses and industries, and three of those firms have gone through “difficulties” like I see reported for the casinos and other troubled businesses of today.  I have witnessed all of these businesses develop that one “bright spot” I mentioned above, though it’s never happened in my business.  But I believe it will happen in the gaming world.

I know it will.  About a year ago, when I first got involved on the “Anti-Sheldon-Adelson” train, I read his editorial in the Las Vegas Review-Journal explaining his valid reasons for opposing Internet gambling.  One of his valid reasons (the one you never hear him talk much about any more) is the negative financial impact online gaming will have on land-based casinos (at least, the ones not also online).  He states:
With the lack of strategic thought some of our colleagues in the industry have put into this, they have missed the fact that the land-based casinos, particularly regional ones, have a very high risk of losing at least 20 percent from their top line while at the same time risk losing a more significant percentage of their bottom line.

Somewhat tactless, yes, but he has a point.  Now, the question I pose to you is this – when a company faces a financial downturn, a loss of income, increased competition that causes hurt to their bottom line, what do they normally do? 

They lay off workers, of course.  Layoffs are as common as milk; more so during the economic downturn.

And does the CEO also take a hit to his already enormous salary and stock options and other benefits too numerous to mention?

Don’t be silly. 

He usually gets an INCREASE in salary and more stock options, too.  The stock price gets a bump, dividends increase, and stockholders and other officers are happy.  Very happy.  Nearly everyone is happy.

‘cept those workers, of course.

That’s the “bright spot.”  That’s the normal course of events – the company has problems, they layoff hundreds or thousands of workers, and the fat cats get fatter.  You NEVER hear a CEO talk about a cut in pay for himself if the company is in difficulty (Lee Iacocca was the last one I remember, and that was ages ago). 

Lay off the peons and have another glass of champagne!

It’s sickening.  It’s disgusting.  It’s the American way – see here, here, here, here, and here.

How can a company justify both layoffs (because the company is in turmoil) and a big fat raise for the guy who is IN CHARGE?  Because he’s doing such a great job?  Because you’re afraid he’ll go elsewhere?  I’d be glad to be rid of that kind of failrure, frankly.

I worked for three different firms that faced a financial crisis.  Each time the choices were clear – we could all tighten our belts a little and carry on, or the chief could can some folks, keep his big earnings, and we’d muddle through somehow.  In one case the choice was a brand new truck, or laying off three workers. 

It was a really nice truck.

When our ice cream shop suffered a decline, we sucked it up and took less money.  When tourism declined in 2001 (9-11) and 2003 (the War in Iraq), we sucked it up and took less.  When more competition came to town in 200, we sucked it up and took less, reinvesting what we did have to start making our own ice cream so we could offer something different and better.  When we had even more competition and the economic slow-down in 2008 and 2009, we didn’t lay off staff.  We didn’t cut corners.  We kept doing what we always tried to do – make the best product we could – and we personally took less.  We wouldn’t think of doing it any other way.

I know that we COULD have put fewer nuts or chips or flavoring in the ice cream, or used a cheaper (lower butterfat) mix, or yes, laid off some of the summer staff and made everyone work harder for less.  But we didn’t.  We believe that you make it in business by having good people and a good product, and you take what you’ve earned and nothing more. 

What CEO is really worth 400 times the average worker in his company? 

Name one.

I have many pet peeves, but raises for folks who don’t need ‘em while at the same time laying off workers who do is what pisses me off more than most.  If Adelson’s casinos were to be financially hurt because of the rise of Internet gaming, do you really think he’d no longer be one of the richest men in the world?  And can you imagine the headline in the Las Vegas papers if it came to be?

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