Seeing economic performance and social performance pitting against each other seems to belong to another era, when ESG didn’t exist. But this is the highlight of this september. The trend is global.
Redundancy plans are on the increase all over the world.
Yet the figures for the first half of the year were good, and most companies had raised their targets for the end of the year, adding massive share buyback announcements to the basket for shareholders. But the stock markets were not convinced. Since the announcement of these excellent half-year results, Dow Jones has lost 3%, FTSE 1% and CAC 40 1%. Companies, always attentive to their shareholders, could not leave it at that.
Six months after the massive redundancy announcements of early 2023, the social plans have reappeared. Whether it’s the anticipated cost savings or the commitment to success at any cost, layoffs tend to work well on share price. It is cynical, but efficient. And the economy is holding up well: the unemployment rate remains historically low in the US (3.5%), compared with 4.2% in the UK and 7% in France.
The banking sector was the first to shoot. In London, Barclays announced last week a reduction of about 5% of client-facing staff in the trading division along with some dealmakers globally, as well as restructuring teams within its UK consumer-banking unit. Its share price jumped 3.1% in one day, significantly outperforming the London Stock Exchange.
In New York, Goldman Sachs’ share price gained 5.4% on the announcement of further staff cuts, which could come as early as late October. Goldman’s net profit fell 35 per cent for the first six months of 2023, although the bank had already eliminated thousands of jobs this year. In January it cut roughly 3,200 jobs, or 6.5 per cent of its workforce, in an effort to reduce costs following a dramatic slowdown in investment banking activity and losses at its consumer banking business.
In Switzerland, UBS announced 35,000 job cuts following its merger with Crédit Suisse. Share price jumped 10.5%.
The tech industry is also struggling. The massive plans in January 2023 have not been enough, and many ar now going for a second round. the workforce reductions have been driven by the biggest names in tech like Google, Amazon, Microsoft, Yahoo, Meta and Zoom. Startups, too, have announced cuts across all sectors, from crypto to enterprise SaaS. Roku has announced September 6 that it plans to lay off approximately 10% of its workforce, representing over 300 employees. Tekion announced that they laid off 300 employees, mainly from India office. CD Projekt Red will also lay off about 100 people over the next several months, or about nine percent of the workforce. The running total of layoffs in the US Tech for 2023 to date is 224,503, of which more than 10,000 announced for september. according to Layoffs.fyi. On average, share prices rose by 10% following these announcements.
There is an exception. The media industry is also reducing headcounts, but this does not result in shareprice rise. In Germany, ProsiebenSat.1, the media group, is cutting 400 jobs, following in the footsteps of Bertelsman, which is cutting 700 jobs, and Axel Springer’s Bild group, which has announced several hundred job cuts. Stockprices fell in average 1,2% on the day of announcement. The challenge for ESG managers around the world this autumn is now to stay on course with the ‘S’ in ESG performance, despite these waves o