Why do companies typically choose to implement layoffs affecting numerous employees rather than considering salary reductions for top executives like the CEO?
In: Economics
Because – more often than not – a pay reduction for the C-suite wouldn’t realistically be enough to cover the money saved by the layoffs anyway. This obviously depends drastically on what industry the company in question is involved in, but no matter what it’s important to point out that someone’s pay is NOT THE SAME as the cost associated with keeping them employed.
When you consider things like administrative overhead, benefits, workplace safety stuff, even relatively ‘cheap’ labor can get expensive fast.
A million dollars sounds like a lot – and to an individual it is. But if a 50k USD employee costs an additional 50k to keep employed (not to mention any admin staff) then a 1 million dollar paycut for the CEO could let 10 people keep their jobs – but even…for how long? And will those 10 retained employees be worth it relative to the increased value they generate/revenue they bring in?
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