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Stocks, CEO pay, and furloughs. What can we learn?

Three business focused stories out I want to highlight.

The New York Times has a piece looking at Big Tech’s Domination of business.    The stocks of Apple, Amazon, Alphabet, Microsoft and Facebook now represent 20% of the stock market’s total worth.  This is a level not seen from an industry in the last 70 years.  This as Apple reached $2 Trillion in market value on Wednesday.

The Washington Post took a look at CEO compensation, which climbed to its highest level in seven years last year.      The Economic Policy Institute found that executives set a CEO to worker pay level at 320 to 1, up from 293 to 1 in 2018 and from 61-to-1 in 1989.  

The Post also looked at companies that have held off on furloughs, and cited a Harvard Business School study.    From that piece, “ One study from Harvard Business School found that after one Fortune 500 company  laid off  15 percent of its staff, the number of new inventions it produced fell by 24 percent the following year. Another study found that a 1 percent reduction in staff  correlated  with a 31 percent increase in voluntary turnover in the next year. Yet another study  revealed that those who continue to work at a company after a layoff experience a 41 percent decline in job satisfaction and a 20 percent decline in job performance.

Why do we care?

It’s no secret I’m very pro-small business.    My lens of analysis comes from that perspective.  93% of technology services companies are doing less than $5M in revenue, which is a long way from some of these Fortune 500.

That said, there are lessons here.  First, and it’s worth reinforcing, the stock market is no indicator of the economy.    This data adds to the ever growing pile.   Do not use the stock market or stock prices as a measurement of the economy.

The second two stories tell me this.   Those companies that avoid furloughs will have a stronger team.   They create more and they do not have to absorb the job satisfaction and job performance drops.    Additionally, those big companies… they should have room for that based on that CEO compensation gap.    They just should.

Thus, the super power of smaller companies is their ability to create that better workplace.  I’ve been focused on a number of ideas in this space – addressing childcare or work-life balance.    I think there’s also power in not having that wide compensation gap.  It’s a lot easier to “be in it together”… when you really are in it together.   Small company heads are not living that pay gap.    Leverage that.   You can build a better workplace.

Source: The New York Times

Source: The Washington Post

Source: The Washington Post