Morale

Throaty cheers may well echo down the corridors of the Eccles building as news of another round of job cuts in the tech space hit the wires, such is the apparent resolve of the Federal Reserve to curb this year’s bout of inflation that seemingly popped out of nowhere. Unless of course the run of sticky prints is less about demand, which might well be curbed by rising unemployment; and more about supply, on account of – amongst other issues – years and years of underinvestment in key industrial commodities. Time will tell. News, though, of widespread job losses in the once booming tech space is either a sign of companies right-sizing the workforce after the Head of Talent got over the skis on pandemic related distortions to the top line, or a sign that the 2000 tech-wreck is back for another showing. Should such recent trends persist though, there is going to be a real issue with employee morale. With a change in wind, a turn in the tide – choose a metaphor – the market is slowly reappraising a world of structurally higher, well, everything. It was interesting to read this week, then, about a neat ‘expose’ on how many executives of mega-cap tech have used their prodigious cash generation of the ZIRP era. The author notes that there are many things management can do with year end profits, but the one that makes shareholders go all warm and fuzzy, is news of a buyback. News that the share count will be shrinking. Fewer shares, larger slices of the profit pie in future years. So goes the thinking. It was, then, a surprise to read that some of those buybacks that were greeted with investors doffing boaters into the air, have been used to monetise stock-based compensation. In one instance, the whole lot. Leaving absolutely no benefit from the buyback to actual shareholders. For employees, share based compensation is a big attraction, and so watching the implosion of prices YTD, has left a hollow feeling and a lot of doodling, and staring into space. More so when nobody really knows how much further there is still left to tank. Talent needs to be incentivised and if not, can walk out the door, as quickly as it walks in. Pushed, or otherwise. As for those buybacks, management might want to steel the chops for shareholders to go full on ‘Jerry Maguire’ at them come the next quarterly catch up.