A day after General Motors (GM) announced it was giving Chief Executive Officer Rick Wagoner's a 41% raise to $14.4 million, the company announced that it will layoff 3,400 employees, including 750 at its assembly plant in Janesville.
Last year GM lost a record $38.7 billion.
Its decision to almost double Wagoner's pay demonstrates again that CEO pay has no relationship to corporate performance!
Newspaper reports suggested in classic Orwellian language that Wagoner had earned his increased millions because he "persuaded 34, 000 union workers to leave and negotiated a contract that trims pay for future workers in half."
Saying GM persuaded long time employees to leave GM is like saying a bank robber persuaded a teller to hand over the cash.
Louis Uchitelle whose seminal work on layoffs and their social costs, "The Disposable Americans," writes: "...layoffs must clearly be seen as a crisis...between 3.3 and 5.9 percent of all full time workers at least twenty years of age were permanently laid off every two years between 1981 and 2001...Hidden layoffs-disguised as retirements, buyouts, temp work and contract work-increase that already significant percentage."
Dr. Kim Cameron, an organizational psychologist at the University of Michigan who attempts to help corporate managers carry out layoffs benignly, has written that no matter how sophisticated the techniques, there is no balm: layoffs are destructive psychologically for the individuals who lose their jobs and undermine long-run corporate performance.
The prevailing wisdom among mainstream economists is that America's "flexible labor markets" give it a competitive advantage over Europe and Japan with their greater emphasis on job security. The Milwaukee Journal's conservative columnist and corporate apologist, Patrick McIlheran, recently parroted this view which ignores the importance of social capital-the trust, communications, value and productivity generated by people working together and valuing each others' contributions.
There is growing evidence that while layoffs might boost short term profits and stock prices, they actually undermine long term corporate performance. As Dr. Cameron argues:" Corporate downsizing remains the most pervasive yet unsuccessful organizational improvement strategy in the 1990 business world."
For more than a decade Wisconsin's manufacturing companies have had difficulty expanding beacuse of a shortage of skilled workers. One reason potential workers have shunned manufacturing employment, despite its high pay, is that they fear the frequency and financial instability of layoffs.
GM, whose market share has declined for decades, has repeatedly restructured because it had too much manufacturing capacity. It has closed plants and eliminated jobs as foreign owned manufacturers built non-union plants (transplants) throughout the U.S. and produced more innovative, higher quality vehicles. Can anybody say Prius?
Just three years ago, in 2005 GM announced plans to close or reduce operations at 12 North American plants and lay off 30,000 employees, 25% of its North American workforce.
The United Auto Workers whose membership and leverage has declined as the Big Three eliminated jobs and spun off suppliers was successful in bargaining an unprecedented severance package for its laid-off GM members. The packages were the result of hard nosed collective bargaining by the UAW, not CEO persuasion.
Wagoner has presided over record losses, declining market share and the destruction of thousands of family supporting jobs. To reward him with a 41% increase while he lays off even more employees is nothing less than obscene.