"When it does, holding onto cash starts to look like the smart call to some CEOs, said Sunil Setlur, founder of Cognisen.co, a leadership and organizational strategy advisory firm. That can mean cutting people, he said, because payroll often represents the biggest line item on a company's balance sheet."
"While cuts are unpleasant for all but the most hard-nosed CEOs - and, of course, the affected workers - they're often a hit with investors. From Meta to Spotify, Wall Street has rewarded companies that announce layoffs in recent years. When markets applaud job cuts, and compensation is tied to a company's stock performance, that incentive structure can make such decisions easier than they might otherwise be."
"In some industries, like tech, where many companies bulked up during a pandemic-era boom, layoffs can also bring payroll back in line with demand. For years, some firms have been trying to thin layers of both middle management and rank-and-file workers to create smaller, more nimble teams."
During periods of economic uncertainty, CEOs frequently resort to job cuts to preserve cash, as payroll typically represents the largest expense on company balance sheets. January 2024 saw the largest layoffs for a year's start since the 2009 Great Recession, with additional employment drops reported in February. Business leaders face multiple uncertainties including economic conditions, tariff policies, elections, AI impacts, and global conflicts. Paradoxically, investors often reward companies announcing layoffs, creating incentive structures that make such decisions easier for executives whose compensation ties to stock performance. In industries like technology, where pandemic-era expansion led to overstaffing, layoffs help align payroll with actual demand. Companies pursue workforce reductions to create leaner, more agile organizations, with Amazon exemplifying this trend by cutting over 57,000 corporate roles since late 2022.
Read at Business Insider
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