Ever since the Coronavirus crisis took its toll on the American economy, Fortune 500 companies have been scrambling to protect their dividends and keep their shareholders happy. The results have been generally negative for workers at those companies. This trend has affected companies in many different industries. Let’s take a look at some specific examples from AT&T & ExxonMobil.
Back in June 2020, The Dallas Morning News reported that AT&T was planning a $6 billion job cost cutting initiative which would, “make ‘sizable’ job cuts and close hundreds of retail stores.”
This was obviously a response to the current economic downturn but the plan was made with the goal of preserving their dividend. That same article reported that, “AT&T has been under pressure to reduce costs and sell assets to help pay down debt, expand 5G wireless networks, raise its shareholder dividend and expand its WarnerMedia entertainment offerings.”
In November 2020, Jason Kilar, WarnerMedia CEO, announced via email to his employees that there will be impending layoffs throughout the company. According to CNBC, Warner wrote, “we will be reducing the size of our teams, our layers, and our overall workforce. These reductions are not in any way a reflection of the quality of the people impacted nor their work. It is simply a function of the above changes I believe are necessary for WarnerMedia and our collective ability to best serve customers”. This was Kilar’s first major move since taking over for John Stankey in May. Stankey is now acting CEO of AT&T.
It appears that this new round of layoffs has already begun. Business Insider recently reported that, “AT&T has laid off 54 employees from its marketing division,” (Dua). This is a small number compared to the 3,400 jobs they cut back in June, but it does signal that the next round of layoffs is underway. According to Business Insider, “The marketing cuts are in addition to the June cuts and come as AT&T embarks on a multi-year strategy to cut as much as $6 billion in costs under new CEO John Stankey.”
Changes in May 2021 have indicated that after all the efforts to save the dividend, AT&T may still decide it needs to be reduced. It was announced that WarnerMedia would be merging with Discovery. This deal caused Jim Cramer to predict a dividend cut in the near future. Cramer tweeted “I don’t think that people realize that ATT is going to have at least a 50% dividend cut which is why if you want income it should be sold.”
Cramer was very critical of AT&T saying that shareholders, specifically those who’ve held the stock long term, are justifiably upset at the decision. He also was unhappy with how AT&T is handling their messaging. “Why not just say, ‘We paid too much?’ Why not just say, ‘We said that the dividend was safe, and we were wrong’?” Cramer said.
Last month Reuters reported that Neil Chapman, ExxonMobil’s Senior Vice President, stated that the company would be cutting capital and operating expenses to protect their dividend. ExxonMobil has since announced that they will no longer be matching U.S. employee’s contributions to their retirement savings plans. The suspension of these benefits will officially begin on October 1st, 2020. This is the latest step in a long line of troubling economic developments in which companies are attempting to save their dividend. According to Reuters, ExxonMobil has now experienced, “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic”. This announcement comes on the heels of several stories claiming that ExxonMobil was effectively laying people off through PIP.
A PIP or “Performance Improvement Plan” is essentially a severance offer to leave the company. According to Forbes, ExxonMobil made changes to their performance evaluation process in order to justify more job cuts. Back in April they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers. Employees who were placed in the NSI category qualified for a PIP. ExxonMobil employs about 75,000 people, so an 8% reduction would result in about 6,000 people out of a job. According to Business Insider, the changes made to ExxonMobil’s employee evaluation process were an attempt to, “cut more jobs without traditional layoffs.”
All of these decisions are being made in the name of protecting dividends. ExxonMobil has raised the payout on their dividend annually for 37 straight years, and it is very much a streak they would like to continue (Hiller et al.). When corporations prioritize their dividend the result is typically a lot of employees out of a job.
- Nichols, Ashton. “AT&T’s $6 Billion Cost-Cutting Plan Includes Job Cuts, Store Closings.” Dallas News, The Dallas Morning News, 16 June 2020, https://www.dallasnews.com/business/local-companies/2020/06/16/atts-6-billion-cost-cutting-plan-includes-retail-store-closings/.
- “The Retirement/Transition Guide for AT&T Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://telecom.theretirementgroup.com/att-guide-download-google
- Stankiewicz, Kevin. “Cramer Rips AT&T Leadership over the Handling of WarnerMedia and the Planned Dividend Cut.” CNBC, CNBC, 18 May 2021, http://www.cnbc.com/2021/05/18/cramer-rips-att-over-warnermedia-deal-and-the-planned-dividend-cut.html.
- Dua, Tanya. “AT&T Lays off People in Its Consumer Marketing Unit – Business Insider.” Business Insider, Business Insider, 6 Aug. 2020, https://www.businessinsider.com/att-lays-off-people-in-its-consumer-marketing-unit-2020-8.
- Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020.
- Jones, Benji. “Exxon Made Managers Dub Some Employees Poor Performers to Cut Staff – Business Insider.” Business Insider, Business Insider, 30 July 2020, https://www.businessinsider.com/exxon-managers-dub-some-employees-poor-performers-cut-staff-2020-7.
- Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
- Gross, Elana. “ExxonMobil Reportedly Changed Its Employee Review Process To Increase Performance-Related Job Cuts.” Forbes, 24 July 2020.
- Feiner, Lauren. “WarnerMedia CEO Reorganizes Company with Layoffs, Focus on HBO Max.” CNBC, CNBC, 7 Aug. 2020, https://www.cnbc.com/2020/08/07/warnermedia-ceo-reorganizes-company-with-layoffs-focus-on-hbo-max.html.
- “Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
- “ExxonMobil Corp. Layoffs – TheLayoff.Com.” TheLayoff.Com – Layoffs Discussion Board, 27 July 2020, https://www.thelayoff.com/exxon-mobil
- Sklover, Alan. “‘My Severance Agreement Says I Can Never Re-Apply; Can I Get around That?’ – Sklover Working Wisdom.” Sklover Working Wisdom, 20 Mar. 2014, https://skloverworkingwisdom.com/my-severance-agreement-says-i-can-never-re-apply-can-i-get-around-that/.
- “Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.
- XOM Summary Plan Description, 2017