> Danish shipping giant Maersk has posted earnings before interest and taxes (EBIT) of $30.9bn for the full year ended 31 December 2022, a 57% surge from $19.6bn in 2021.
> This is said to be the firm’s best-ever annual result.
Really sad to see these companies make enormous record beating profits then months later do mass layoffs just to maintain better returns.
Companies wonder why employees are not loyal, change companies every 2 years, are disengaged, and not working hard enough.
It's because most companies treat employees are expendable and are ready to fire them with a moments notice if some shareholder wants to buy a bigger yacht this year.
Do you suggest they keep employees around with nothing to do because of significantly reduced shipping demand?
I agree with your point about getting laid off being awful, but I think this should be solved by the government having a robust social safety net (funded by taxes) so that getting laid off doesn’t cause stress. Fortunately, Denmark already scores high in this area.
Assuming there is some ebb and flow in demand, they should keep employees around with nothing to do, yes.
Moreover, there is natural attrition. They can stop hiring, promote internally, and so on, until they’ve reached their desired head count.
The point is that both of these are doable when the company is wildly profitable. And they should be done for the negative secondary effects of layoffs (ruining lives, morale loss, people following their laid off friends out of the company, etc).
It seems like these days companies don’t even freeze hiring and grow competencies in house in times like these that much. They just assume (often wrongly) that they’ll quickly hire everyone they need once the demand picks up. But it takes years of training before an employee is fully integrated and has all the institutional knowledge to perform at their peak, and it takes many months to fill difficult positions.
Some people who have been around tech for a good number of decades have seen this fashionable layoff footgun used more than once.
Then they should have hired contractors for the specific timeframe, no?
Otherwise it's just corporate greed: we know we'll have a surge in demand, so we buy new vessels and containers and manpower to last us 2 years; we make huge profits, discard this surplus and blame it on the "new normal" (FTA)
By that logic, every business around us operates on corporate greed since their sole purpose is to increase their profits and bring down costs, not to be a UBI jobs program.
Sure, certain large and profitable companies with sizable market caps could easily stomach having even more idle workers coasting all day for great paychecks, with a corresponding reduction in profits and still stay afloat, but why would they?
Not necessarily. They can be profitable without being greedy.
In this case they could have just said "we don't have capacity to fulfill all new demands, we can happily run at full capacity, and charge more if needed". Other companies could have taken up the slack, new businesses popping up, etc. Instead, they recruited people who prioritised this new job, just to be let go.
>Not necessarily. They can be profitable without being greedy.
Sure, but then they'll be overtaken by their competitors who will rake in more profits as they don't mind being greedy, and your shareholders won't appreciate that.
Greed and capitalism are basically synonymous, as the end game of capitalism is to accumulate as much wealth and market cap as possible, at the expense of your competition, until you own the whole pie.
Preaching to companies "just be OK with being a little poorer this time", while their competitors are using every dirty trick in the book to get ahead, will never work.
If you want a level playing field for everyone to not be greedy, it must come from regulations that hold companies accountable, not expecting companies to voluntarily act in favor of their labor force out of the kindness of their hearts, as that will seldom happen.
I ran a tech startup for several years and I can say you have a simplistic view of this. My company didn't want to be a unicorn, it didn't want VC money, and it didn't want the whole pie. It was funded out of pocket until it became profitable. It was under capitalism, and yet we had no investors other than the founders to be greedy for. We just built a product that was important for us, and we were content with earning enough for this to be worthwhile.
Capitalism is not synonymous with greed. We just idolize greedy people. We call them things like "successful", "self-made", "inspiring", or "capitalist" to absolve them of their greed. In the Soviet Union, people would call greedy people "successful", "self-made", "inspiring", and "communist".
Sure, I get it, and while there's several companies who think like your own, that's not the norm, many, especially the big trillion dollar ones, are the exact opposite.
Do you think Apple, Microsoft, Google, Saudi Aramco, etc. got to trillion dollar valuations by being mindful and not greedy?
All I'm saying is that capitalism does not prescribe greed. Take away capitalism and you have the same problems with greed. Take away greed and capitalism doesn't sound so bad anymore.
Then hire year-by-year (or 6-month by 6-month) contractors with the explicit understanding that they're being hired to cover a surge that they expect to end, and that their contract will not be renewed after it ends.
In what world would that be better than continuous employment as long as needed, for either the company or the employees? (The good times usually last longer than just one year.)
More to the point: Why do you think you have the right to tell them how they should structure their employment practices? Why do you think the entire economy should be restructured to match your preferences?
I agree with making it clear that they are being hired to cover a surge.
You know, I was going to respond with my thoughts, and then I realized they mostly applied to the United States. In a country with guaranteed off ramp/severance pay, most of my concerns are significantly less relevant. That being said...
More to the point: Why do you think you have the right to tell them how they should structure their employment practices? Why do you think the entire economy should be restructured to match your preferences?
Of course I have the self awareness to recognize that I'm just a random guy sitting on the couch supplying my 2¢ on the employment practices of an enormous corporation in a different country. But I assume that's not what you're talking about, since a fundamental conceit of Hacker News (and, frankly, most of the internet) is that random anonymous people bored at work or at home with vastly varying competence, understanding, and reasoning are free to indulge their hubris and make broad, sweeping judgements well outside their own domains, safe in the knowledge that they have zero power to actually enact those judgements.
So that makes the question more "Why should the public have any interest or say in the business decisions of a private corporation?" And if we don't already see eye-to-eye on that, I very much doubt that we will, since it tends to be a very baked in opinion.
Good point that Denmark isn't the US. I also was thinking from a US point of view. I don't know what the rules are in Denmark. That said, Maersk is very international. Unless their layoffs were all in Denmark, they won't all be covered by the same set of rules.
Your long paragraph: Well, yeah, you and me both. And well said.
But on your last paragraph, I probably agree with you more than you expect. The public has a definite interest in such things.
Where we differ (and it seems like a small difference, at least to me) is that I see nothing wrong with hiring people for the duration of a temporary increase in demand, as long as they know up front that that's the deal. For those willing to take that deal, and companies willing to give it, I see no need for the government to prevent it.
Honestly, last paragraph, I was assuming you agreed with me in general, just wanted to note that even if you didn't there was little point in expanding.
Depending on the country, hiring for 6 month, 1 year, permanent, etc is extremely regulated. There is very little leeway or choice to the company ... aside from hiring outside that country.
> you might as well say management must be able to see the future.
Arguably they can't have ignored that a surge this big would be temporary... It's not like we suddenly discovered a massive amount of resources at our disposal to produce the goods they are transporting.
EDIT: It's frankly amazing to see how much has been projected onto my comment. For the sake of transparency towards the neoliberal police, I quoted what was obviously the only phrase I was answering to.
So are you suggesting they should not have hired those workers, and left that customer demand stay unsatisfied, with all the knock-on consequences for workers in other sectors? These kinds of policies just lead to ossification of the economy.
We need dynamic, responsive economies that can adapt to conditions, and we need strong protections for worker's rights and support for citizens through economic adjustments. These are not contradictory goals. A stronger more adaptive economy is better able to afford the costs of effectively managing such adaptations.
I don't think anyone unconditionally owes me a job. I don't have an unconditional claim on other people's money just because they paid me in the past. I'm owed fair compensation for my work, and reasonable notice and compensation if I'm let go, which has happened.
It's not reasonable, and is seriously inefficient, to compel private companies to be government work programmes. The result is companies won't hire when they need more workers in case they get stuck with them, harming the company, workers, tax payers from reduced revenue, and the economy in general.
No, I only answered to the previous commenter who wrote that management can't predict the future. They knew it was coming, and increasing temporarily the headcount was their plan.
Well, they did. Hence the job cutting. That you don't like that is a different topic.
I don't like job cuts neither, but shipping is directly linked to the global economy. And if we go into a slow down, shipping demand slows down as well. Head count at Maersk is directly linked to that demand, so there are only so many options on the table.
Shipping goes through these cycles on a regular basis, not adjusting would put all jobs at risk. The real tragedy is, that a signifocant chink of those affected are under paid crew members and blue collar workers from countries without social security nets, whose families depend on their pay checks. And working on a Maersk vessel easily beats the quasi slavery on some fishing vessels by light years.
>They knew it was coming, and increasing temporarily the headcount was their plan.
I see no evidence for this. Business was booming by the end of 2021 and headcount increases realised in 2022 would have started the year before, which was before the invasion of Ukraine.
In any case a 10% drop in had count is not all that much. That's the level of head count churn most companies go through in a year anyway. The majority of this was probably satisfied by early retirement and voluntary redundancies. In Europe in most circumstances you're required to go through that process first. This whole furore is a storm in a teacup inspired by profound misunderstanding of how economies and companies actually function in the real world.
> We need dynamic, responsive economies that can adapt to conditions, and we need strong protections for worker's rights and support for citizens through economic adjustments.
So let's talk about those generous amounts of taxes that were paid by Maersk lately...
>I'm owed fair compensation for my work, and reasonable notice and compensation if I'm let go, which has happened.
You're not owed either of these things.
The way you write is curious. You don't really seem like someone who needs to work for a living, but you're trying to portray yourself as labor and not capital in your posts.
Or you are against your own self-interests, which is illogical.
>>I'm owed fair compensation for my work, and reasonable notice and compensation if I'm let go, which has happened.
>
>You're not owed either of these things.
They're in my contract, and protected under UK employment law.
>You don't really seem like someone who needs to work for a living, but you're trying to portray yourself as labor and not capital in your posts.
You're hallucinating.
>Or you are against your own self-interests, which is illogical.
What are our interests? I have interests as an employee, but I also have interests as a customer of other companies, as a tax payer, and as a citizen generally.
A lot of the products I buy here in the UK, or inputs to them are probably transported by Maersk. I have an interest in Maersk being a well run efficient company that does a good job cheaply and reliably transporting those goods. If they have insufficient employees or investment, that jeopardises supply. If they have increased costs, that makes the goods I depend on more expensive.
It's in my interests that companies I buy products and services from are efficient and are not burdened with unnecessary costs. Also if they see an increase in demand, that they can respond to that without worrying about being locked into near-permanent employment contracts. I even have that interest as an employee, because if my company becomes ossified employing people that are under-utilised that saps their ability to invest, grow, compensate me better, or even for the company to survive.
It's also in my interests as tax payer that there is an affordable social safety net, but as an employee that there is an adequate one. Both factors are important to me.
The whole point is that they could have changed nothing and still prices would have stayed the same because they made a lot of profit in the years before.
They could have paid by having less profit. Instead employees are paying by losing their jobs.
This would have been a totally different discussion if they were making a loss. If you ask me a good business keeps a safety net when times a good and uses their safety net when times are bad. Only when those savings run out they should consider letting people go.
They are responding to changes in demand. Do you think they have an obligation to make a loss in future if they made a profit in the past? What effect do you think this would have on their ability to attract investment, the interest rates they have to pay on loans, the costs of insurance?
Even beyond the business itself, profits mater. They are the surplus a business generates that gets plowed back into the economy outside the business. That money gets invested in other businesses, spent on other goods and activities. It's the fuel that goes into other beneficial economic activities.
Leaving it sunk in an unproductive business that's paying people to do less, and generating fewer outputs is a tax on the whole rest of the economy. It's invisible because it's investment and spending that never happens, but it's a real effect. It's true that those unproductive workers still get paid and that money goes into the economy, but if they were working in another job at a productive company or retraining, that's a net gain. That's can't happen if they're stuck in an unproductive job.
>If you ask me a good business keeps a safety net when times a good and uses their safety net when times are bad.
Any good business does this, but they need to take acton on foreseeable headwinds in order to maintain that safety net against unforeseeable ones. When it looks like times are uncertain and getting worse, possibly in unpredictable ways, is not time to give up your safety net. That's how businesses fail and the whole company goes under. How does that benefit anyone?
I think it's feasible in some cases but isn't in others. Here in France for instance a lot of seasonal workers are in the ski resorts during the winter and along the shores during the summer. It suits only a certain category of workers, of course.
Unless you are an exec I suppose - based on what I see, it seems like in good times you make money, in bad times you take responsibility and others loose their jobs, and you still make money.
Maybe they could cut everyone’s hours and keep more people employed? This would make surging to meet future demand spikes much more easy. Novel idea I know.
Companies are run with varying levels of competence, so it's not strange to see the weakest companies lay off first. Adding to the above, better capitalized companies can use this opportunity to poach high performers from weaker companies.
This layoff is due to market trends not company performance. So unless they are not telling the truth it has nothing to do with how strong this company is.
Cutting hours isn't going to be a viable option when you're also cutting their pay.
There are plenty of people who simply can't afford to stay at a company when their pay is being cut by 10% or more. They need pretty much all of their salary to pay bills. Taking such a pay cut is only an option for the higher incomes, where there is some jiggle room due to significant discretionary income.
Ontario Canada's NDP gov't tried this approach in the 90s for the public service in response to a budget deficit. They called it Ray days. The approach was very unpopular with public servants and the public generally. It was one of the reasons for the party's loss of influence.
Was it miscalculated? If shipping demand is substantially higher in year X than it is on year X+1, the it sounds like having a larger workforce in the former than the latter is the correct headcount calculation.
Think of it this way: if Maersk didn't expand headcount just so that they could avoid layoffs later, then people wouldn't have had jobs in 2022. Consider
* 5,000 people working in year X and in X+1.
* 10,000 people working in year X and 5,000 people working in year X+1
Which was the better situation for workers and society at large?
This appears to be an example of a company NOT miscalculating how many people they need, but how many people they need changes over time. Therefore headcount should be expected to change over time.
Companies hire workers when the need them and let them go when they don't. Just like workers take jobs when they need the pay and quit when they don't.
If management did not hire more people when they needed more workers it is bad for the company and also bad for the workers who could have been hired and earning those wages when there was increased demand.
Yes, let's set the minimum requirement for management at being able to predict the future. But then what? Do you start adjusting for in two years now, risking failure? Or later?
Not every company can afford ridiculous salaries and headcounts until the next VC funding round comes through.
All of this forgets that management, in capitalism, represents the shareholders. Their ONLY job is to invest as wisely as possible, and yes, that means predicting the future.
Now there's 2 parts of management. There's accounting, processing orders, filling out whatever government forms need filling out, keeping up to date with new regulations, ... Sometimes this is called accounting, but generally it's called management. They're not who we mean.
But then there's management, like the C-suite. Who "set direction". Their ONLY job, like shareholders, is to predict the future. That's literally their only function.
So yes, firing them because they misjudged required headcount doesn't sound even a little bit unreasonable.
But they did everything right for shareholders. They positioned the company to benefit from pas demand, and now they adjust head count for lower demand. Both decisions are good for shareholders, and the long term survival of a company.
Unless of course, and I didn't check, Maersks bets on air freight, warehousing and fulfillment didn't oay off. In ehich case the C suite set a wrong strategy.
> government having a robust social safety net (funded by taxes)
I don't buy this - not any more. These companies are going to need these employees next year, when demand picks up again.
This is pure folly of management. The problem is upper management never pays for their mistakes. I know a company that fired it's last Perl developer and their payment system was written in perl. They literslly couldn't take payment for like 2 months becaus of it. You think the guy that made this decision has lost any sleep?
This is like just in time supply chain - lets keep zero stock on hand to 'optimise'. Oh shit, we cant get shipment in time because of disruption/flood/covid. Now we are loosing money. Well, the guy that made the decision doesn't care.
What we are seeing across the west, is that companies are destoying the base of skilled middle class employees that they actually need to operate. This is happening on purpose.
After the base is destroyed, they will beg for gobernment subsidies to compete. They basically use taxoater money to pad their profit margins
Just to add to the top of the thread. The solution here is safety nets paid by taxes. "Firing management" is not realistic, humans are generally short sighted and its hard to identify when things are a bubble or not. You cannot put it on the laid off employees to understand the economy well enough and for low paying jobs to have the savings to support boom/bust periods always.
Similar to health care, it is useful to have safety nets to allow for the free flow of labor.
Now where it gets sticky is you cannot apply it outside of your country so in cases like shipping, the vast majority of their employees who run the ship are from low wage developing countries.
Yes you can apply it to outside your country. However even though they make big profits they don’t want to.
They could just apply the same pay, safeguards and social support to employees of low wage countries that their Danish colleagues receive. Remember that your countries rules about pay, leave and social security are minimums, and your employer is choosing not to give you more than the minimum.
>Do you suggest they keep employees around with nothing to do because of significantly reduced shipping demand?
It's not unheard of in the past to resort to salary cuts, reduced hours, etc, while they bridge some solution or wait out what might be temporary.
There's also the notion of better planning. If you suspect, for example, a demand spike is temporary...there are ways to deal with that other than overhiring employees.
They went from 80k employees in 2020 to 100k in 2022 (mentioned somewhere in this thread). Now they cut 10k. Maybe that is good planning? Maybe over hiring make responding to demand quicker? There are all kind of consideration, and yet people are quick to blame them without knowing facts.
Your electricity demands probably change drastically between summer and winter. Do you not use electricity during the winter because you know you won't need as much during the summer?
People are a resource just like electric. There needs to be flexibility for elasticity. This is why redundancy exists as a concept. Of course people should be compensated for elastic demand and you can of course always seek to increase your notice period to increase your security.
Right, and for example, contractors are often a better match for fluctuating demand rather than employees. Or diversification of market offerings to reduce seasonality. Or skill diversification for employees so they can be repositioned during low demand in one area, etc.
Or at least being up-front about the temporary nature of the employment and structuring the program to suit that. "Seasonal hires" have a different expectation.
> contractors are often a better match for fluctuating demand rather than employees
Not when it's universal and systemic.
> Or diversification of market offerings to reduce seasonality
And this is good, but really too much to ask if you are going to require it.
> skill diversification for employees so they can be repositioned during low demand in one area
This also doesn't work when the changes are global and systemic. But then, most of the layoffs we have seen in the past were rushed things that didn't even bother to evaluate this option. This one cuts me as done in around the shortest timing to make this possible, so we'd need to check if they tried it or not.
We also don't know if they were up-front about the temporary nature of those employees. They are certainly not formally temporary because the timing doesn't work here (what is good for the employees anyway), but we don't know if they were warned.
Maybe companies can have like a savings account for when they don't make a lot of money, that way if they think they might not make as much then they can cover the difficult times.
Okay, but you can't expect companies to keep a buffer out of their own good will. You need the government to do it. Keeping such a buffer at a per company level probably is a bad idea too, because downturns tend to be sectoral. A bigger risk pool (eg. across industries) would be far more robust. Surprise! You just invented unemployment insurance!
Yes you can expect companies to a buffer. It starts by questioning layoffs like this. Because they should have depleted the buffer first before layoffs. If after that layoffs still happen the gov should have a second layer of supports in place. Because indeed like you said if a whole sector has a downturn its difficult for someone to find a new job.
What is the economic rationale behind a company keeping a large portion of its workforce idle? That's a waste of labor. Sure, it's probably a good idea to keep people paid for a while after layoffs to ease their transition to an in-demand job. But that's what unemployment benefits do.
What is a waste and to whom? The employees still get paid, so they get the main value they signed up for. A bigger waste would be loss of income and security for these employees.
So its a waste for the bottom line of the company owners? Thats what 100 people max? Compared to 10.000 jobs and livelihoods lost its pretty clear to me.
To the economy as a whole. At the end of the day you're still having workers twiddle their thumbs not doing anything productive, with no incentive to move onto another job where they'll actually be doing something useful. We should weigh this against the workers' economic security, but let's not pretend that keeping workers around is some sort of free lunch.
But why do we need government do to that, if it is insurance why cant it be provided by a insurance company.
better, Cheaper, and with out the political corruption that comes with all government programs.
Hell we just saw during COVID unemployment "insurance" being used as a political tool to essentially buy votes, by all political parties and organizations. Also used a tool to make authoritarian control of the population palatable
Further How many dystopian novels have the trope of the masses being paid not to work...
The axiom of a "social safety net" is apt but not the the way people using it believe it to be, the social safety net in practice tends to be like a fishing net, once you get entangled in it, you rarely escape it...
It would be impossible to craft a rule like this that can be applied effectively. Plus the overhead of each company having to manage it. Much more reasonable to bundle it with corporate taxes and the country to manage the safety net. Ideally this would help the free flow of labor effectively.
Isn't it much better that the employees instead go work somewhere were they're needed? What in the world would be the reason to keep them around doing nothing? Give them better pay when they actually work and then send them on their way.
Well because clearly the board isn’t great at anticipating market fluctuations, so better keep people around for when demand picks up again.
Also its about 10% of employees right, that means if you give the whole company 1 day off every two weeks. Everyone who would have a full workload again. Googles 20% was about double that
The difficulty is that putting the onus of reallocation on a centralized authority leads to less efficient allocation (e.g. all the problems with command economies).
Decentralized people that each make individual choices more quickly and ideally allocate unused labor where it's most needed.
... but to the broader point from sibling threads, the humane solution here is {permit companies to be agile with layoffs} + {fund strong government-provided safety nets for unemployed workers}.
Was unclear in the article but I would be curious if this impacts any workers in Denmark or if this was mostly a cut of the cheap developing nation labor that runs the ship.
I think there is some middle ground. I used to work in manufacturing. During the slow periods, employees with nothing to do were reassigned to projects to improve safety, productivity, quality, plant maintenance, and to help the employees with learning and development. Yes, some employees did get laid off, but the attempt was to invest in the company and people before getting to layoffs.
I don't know the shipping industry, so it's possible this isn't feasible.
If they're making record profits and have already employed decent workers, isn't the optimal strategy surely "find something profitable for them to work on"?
I'm not quibbling with that. I guess I'm questioning whether laying off thousands of people is the best reaction, as opposed to redirecting their efforts.
Pretty much this. Nokia had it's record year of profits the year after the iPhone launched even though the writing was already on the wall. It's easy to go from winner to looser in a snap with no way to turn back and hiring even more people won't help if the ship is heading towards the iceberg with full steam ahead.
I think it’s about minimizing agency cost, to encourage workers to work in the interest of the company instead of purely their own interest. This is hard to do even in the best of circumstances. If people see that there is no connection, or even an inverse connection, between working hard and being rewarded they’ll find creative ways not to work hard. I’m sure people currently working on efficiency initiatives are now a lot less motivated from them to succeed.
Not saying that they should have kept the employees, they just keep in mind that short term greedy can come at the cost of long term greedy. I think the real problem is often executive compensation incentives short term greedy behaviors at the expense of long term greedy behaviors, so while this decision may not be in the best interest of the company I’m certain it’s in the best interest of the execs.
One alternative to hiring/firing would have been for existing staff temporarily work harder with offers of large bonuses. Maybe they tried that as well. This would only be effective in some areas of work so some hiring/firing correlating with demand would still be needed.
This makes the assumption that the increase in headcount was to cover the surge in demand, and the additional assumption that the additional headcount was needed to satisfy the demand (obviously, some of it might).
For technology in particular (which seems to be one of the affected functions), this is hardly the way it works - tech projects are unlikely to be a good way to handle temporary spikes in demand, etc. Even for more specialized non-tech functions the lead time for getting someone productive can be too long to make this a feasible strategy.
Maybe also particularly for tech, but I suspect it is much more likely that the "good times" gave the company a large appetite for longer term strategic initiatives/investments, and now that tides have turned that appetite has gone too.
There is no way that it has come as a surprise that the market would change eventually, and creating and killing long term initiatives as the market goes up and down is bad planning, bad for the people affected and bad for the company as well.
Yes, it is. Another interesting thing from the local employment market is that an employee can't be fired for performance reasons (after the trial period).
They can only fire someone for absense, HR problems or part of a group layoff (10% of workforce minimum at once).
Those 10k employees woudn't have nothing to do. Do you think every single employee are used at 95% all the time, that the head count reflect 100% of the needed workforce?
Not GP, but yes, I think the management of the company should decide on company matters like hiring, firing, and budget matters. It’s literally why they are employed.
The earnings Maersk has posted reflect the past. The mass layoffs reflect the future of the company (i.e., less demand in the future). So I wouldn't put these two things into one argument necessary.
Then, an absolute number of profit doesn't reveal much. Maybe this seemingly huge profit is tiny compared to the effort to make it (i.e., the profit margin).
As much as I'd like to see a world where we value more aspects of a business than only profits, I can not change it alone. There's a brutal competition of companies to earn a certain profit margin. And Maersk is more or less forced to play this game until we change the rules.
> The earnings Maersk has posted reflect the past. The mass layoffs reflect the future of the company (i.e., less demand in the future).
If I draw parallels to personal finance, say I have a record high profitable year, would I rather assume my profits stay record high in the future and increase spending/investments OR would I ensure I have enough rainy day funds for the next inevitable slowdown (at least give me enough runway to weather the slowdown before cutting big line items in my expenditure). Funny enough, this time around some big companies that laid off thousands just after a year of record profits also had record amounts of cash on hand, making me wonder if it's more about manipulating stock price to a desired level.
I understand that companies are more complex than personal finance but am I wrong that these are potentially symptoms of mismanagement rather than just to be pushed under the rug as demand-in-the-future? Surely, the money/time spent on hiring, training, laying off, and rehiring, retraining people a year or two later when demand returns is worth something. Just seems to me that the economy will be so much more resilient if everyone simply focussed more on emergency funds
By cutting now they are building that emergency fund. They see demand dropping back to pre-COVID levels or worse. They haven't cut employees that far yet though.
Your analogy can also work here. When I have a record year I might add some extra services to my life. I see that changing and cut the services before it's a huge problem.
Start building an emergency fund when you see an emergency is already too late. Cutting an expense or two in hardship is fine but the problem is after one windfall taking on recurring spend of extra services assumes a windfall to recur too. Isn't this similar to living pay check to paycheck? If this is someone else's personal finance I'd say it's none of my business, but if it's likened to a public company, I'd say it's not well managed.
If you believe a public company is mismanaged, you should not invest in it. If you believe it’s seriously mismanaged and others don’t yet realize that, you could even consider shorting it.
Others who believe the company is well-managed by looking at the forecasts and deciding to return to staffing levels still well above their 2021 (but lower than last month) will continue to hold (or even buy) the shares.
This difference of opinion is what makes a market.
The point looks to be diluted as the thread progressed. It went from questioning potential shortcomings in the status quo to pointing that one could profit off the status quo, and hence justifying it.
The point imo was how many companies can be potentially overly aggressive during a bull market/bubble e.g. over hire, and seemingly have no accountability for a handful decision makers affecting thousands of people. Mass layoffs can have serious consequences on the people and the economy.
Yes, the employees should expect it and be prepared, and yes, share holders can profit off it, however to give an example there are precedents like the mortgage crisis where there were regulations imposed preventing companies taking unnecessary risks and causing major economic events. So, it isn't that outlandish to question if a (many) companies took too many unnecessary risks.
> The earnings Maersk has posted reflect the past. The mass layoffs reflect the future of the company (i.e., less demand in the future).
And should demand pick up again in 2-3 years worth of time, they'll now have a really hard time ramping hiring back up... fucking beancounters don't learn, even as the aviation industry is right now showing just how bad this effect can get.
Not really. The shipping industry is known to be extremely cyclical with a liquid labor market. The companies who survive are the ones that react accordingly.
In just a couple of years they have went from scarcity and record profits to a capacity glut and shipping prices cratering.
I'm going to go on a limb and say that the "fucking beancounters" has done more financial modeling on this decision than some armchair CFO on hn who probably haven't even seen their last quarterly statement.
Especially since people on HN eho are "tech worker" assume the, including an over exagerated importance of themselves, tech employment dynamics apply to other industries. Not that the tech employment is anything like people think is, the mass layoffs showed as much. And as soon as FAANG start hiring again, most on here would be happy to sign up again.
They had a huge surge of demand coming out of COVID, and hired to meet that demand. That demand is gone, and they are moving their staff requirements back down closer to pre-COVID (and not even that far). What exactly were they suppose to do?
>Keep the headcount as high as possible while still turning a profit
Opportunity cost is a thing. Just because you're not in the red doesn't mean the decision is costless. Think about it from the opposite perspective. Suppose you're a company with the right number of employees (neither too much nor too little) but you see demand is dropping. Would you go on a hiring spree so you could "react on demand going up again in a short notice"?
Specifically, people forget that there always options to deploy limited capital.
- Spend it on labor
- Spend it on sales
- Spend it on R&D
- Fund capital improvements
- Save it in bonds
Which is better for Maersk in a softening demand environment? To retain headcount or invest in capital improvements on their ships/facilities?
Their CFO office has definitely modeled relative ROI.
And, from a more socially conscious perspective, let's not forget the shipping industry is trying to budget massive capital expenditures to reduce their carbon footprint by reworking their ship powerplants.
Anything done to keep headcount above necessary levels would have caused slower hiring and in turn caused the demand shock to go on even longer.
I'm curious about your solution though. How many people do they need to keep on staff that are not doing anything? How much profit are they allowed? Do they have to lose money before they are allowed to trim the workforce? Do they need to be prepared for another COVID-level demand surge?
From 2021 to 2022 Maersk increased head count by 20%. Now they're cutting it by 10%, but it's not necessarily the same workers. A 10% churn rate is pretty common. A decent chunk of the 10% cuts could well be managed through early retirement, natural leavers and voluntary redundancies.
European countries have robust rules around these things that often require companies to offer voluntary terms and such first. I think the outrage about this is almost certainly misplaced.
Good C-level execs actually care about staff retention and fluctuation rates. The really good ones make HR ask about departure reasons in exit interviews and act accordingly - given that each departure costs a significant amount of money in hiring and training costs, it makes sense to weed out bad mid-level managers.
Shipping is decidedly not a VC (as oppossed to MBA) driven hyper growth sector. It is rather directly linked to global economic growth, with only very limited means to influence demand in general.
They have enough people with MBA on the management board.
Usually the only companies that have empathy for their employees, management started on the bottom, instead out of management school with their beloved MBA degrees.
Well, for their Danish employees at least, they’ll get 3-6 months notice, and they’ll be required to negotiate with employee representatives due to the size of layoffs.
And then a combination of public and private unemployment benefits kick in. And if you want to e.g. retrain or pursue a graduate degree, there’s support for that too.
So there’s a solid safety net, but employers are also required to shoulder some responsibility for supporting terminated employees.
Top ocean carriers (including Maersk) are mature and well established organizations. For what concerns their core activities, that is transporting of containers from A to B across oceans, short sea and occasional inland, they are Pareto efficient [1]
The surge in the transportation services demand during COVID couldn't be resolved by additional hiring and was offset by increase in freight rates, hence the enormous profits.
They couldn't resolve surge demand by hiring, as their bottleneck was and still is the land infrastructure, sea ports, terminal (in)efficiency, inland transport to which they have little control of.
Maersk decided to become vertically integrated carrier and started acquiring various companies, including last mile delivery services, custom's brokers, air freight capacity etc. This, in my opinion, contributed to the increase in the headcount.
Other carriers followed the Maersk acquisition spree...
A better solution for example would be giving the workers tools and knowledge to get what they want just from their job (because everyone is different).
But then they'd still be workers and not corporations, and thus subject to the power imbalance spoken of earlier. Perhaps we could simply assign everyone a corporation at birth? Then it doesn't even have to be an active activity.
Looking at the phenomenon more clinically: when management attempts to extract the maximum amount of work for the minimum amount of pay, it's only natural that the employee attempts to maximize pay for the least amount of work. Both are being economically rational, but economic rationality at times can be indistinguishable from psychopathy.
The problem with this kind of mass-layoffs to maximize earnings is that it's a very short-term gain prioritized over long-term growth, a symptom of the cancer that is the mentality "shareholders expect infinite growth forever".
>it's a very short-term gain prioritized over long-term growth, a symptom of the cancer that is the mentality "shareholders expect infinite growth forever".
But "shareholders expect infinite growth forever" directly contradicts "short-term gain prioritized over long-term growth"? Even if they prioritized long term growth that would still be "shareholders expect infinite growth forever".
> But "shareholders expect infinite growth forever" directly contradicts "short-term gain prioritized over long-term growth"?
But it doesn't?
Shareholders expect companies to make whatever decisions are necessary to maximize short term profits, expect those profits to be infinite, and expect this to happen every quarter, every year, in perpetuity.
The part that's contradictory and that you omitted was "short-term gain prioritized over long-term growth". While it's theoretically possible for the two to coexist, the way it's presented is as one-or-the-other proposition, which is where the contradiction comes from. If it wasn't one-or-the-other, people wouldn't getting mad over it.
It makes more sense as "shareholders, over the long term, always want high short term growth". It's possible to be focused on short term growth in perpetuity. It's not rational for investors to make demands that harm their own long term goals, but you could argue they do sometimes, at least in aggregate.
Depends on what your job is. If you are delivering packages in a van, you are just a cog. You can work as hard as you want and they will replace you all the same.
The idea is that shipping is a proxy for the "real economy" but given how much cyclical speculation these actors undertake with the ordering and scrapping of ships and the associated "costs" of personnel, I wonder to what extend that is really true.
The HN news title seems inaccurate. This is not necessarily a drop in demand nor is it applicable to all shipping as also suggested by the title.
The article suggests it is an oversupply of container ships with very few ships scrapped as opposed to demand: "The industry invested heavily in new container ships during and after the pandemic to meet strong demand and benefit from record freight rates. A large number of new ships entered the market since the summer with no signs of idling or scrapping, said Clerc."
Furthermore just because container ships were over ordered does not mean that other types of ships were so it is misleading to just refer to shipping in the title. It should be "container shipping".
Since this is future demand it might suggest that some significant moves from China manufacturing to N America manufacturing including both Canada and Mexico.
A confirmation would be to see if truck traffic through specific border town routes went up.
Recessions start when all the unions get their new contracts. 2024 is going to be detrimental for many people. Lots of job and property losses coming soon
There's an interesting narrative forming in global trade around nearshoring/reshoring. The framing is often around manufacturing moving from China to Mexico. News like this supports that narrative. While it's somewhat clear that manufacturing is moving out of China, it's less clear where it's going.
Is flexport an "industry plant"? I see them posting here literally every month saying they are hiring and on linkedin but never anything more than that.
people in the civilized West might have forgotten the long and standard history of slavery for labor. Rome was a slave state. Lots of post-Rome empires have traded slaves. Slaves do labor.
Many of the comments here immediately and unequivocally supporting management are a reminder that the veneer of civility is soon lost when money is at stake.
Surprised to see steady increase in recent years. What are the 2019 numbers? 2020 and 2021 are the pandemic years, and Maersk should've been one of the most heavily impacted companies in the early months.
It appears they have executed a strategy to become a vertically integrated end-to-end logistics company rather than just a container shipping company. Profits during the pandemic allowed them to accelerate the change.
Maersk went hard into the 3PL and fulfillment business, includimg hiring quite a few people from Amazon. They are in a quite interesting position for that.
Slow down in shipping demand? Few months ago a ship got stuck in the Suez Canal and the world went bat-$h1t crazy, but now shipping is a chill business?
> This is said to be the firm’s best-ever annual result.
https://www.ship-technology.com/news/maersk-logs-record-prof...
Really sad to see these companies make enormous record beating profits then months later do mass layoffs just to maintain better returns.
Companies wonder why employees are not loyal, change companies every 2 years, are disengaged, and not working hard enough.
It's because most companies treat employees are expendable and are ready to fire them with a moments notice if some shareholder wants to buy a bigger yacht this year.