Microsoft puts the freeze on employee salaries, CEO pay still as hot as ever Call it the endless drive to sate Wall Street types or sensible business planning in the face of a cooling economy – either way Microsoft says it will freeze the salaries of full-time employees this year. In an email to workers, shown to The Reg by Microsoft insiders, CEO Satya Nadella delivered the bad news, saying the …
Why cant you accept the simple fact thaat leadership lies ?
Everything about their work is a lie, at most companies they are the ones who have the least skills related to the core bueiness. Nadella for example has no qualifications or skills relating to software analysis or development. Another perfect exampel of this is Balmer, he would never have the skills to contribute if he became anonymous and had to work at the entry level.
They arent leaders, they are simply opportunists who take money because they can, just like Putin takes money because he can, not because of merit or any other measure.
I asked Bing Chat AI to distill the following into a single sentence giving it context on who said it and why.
"To remain a consequential company, we must maintain a leadership position in our at-scale businesses of today, generating enough yield to invest and lead in the next wave, while staying on the frontiers of both performance and efficiency. That is the context in which we're making decisions and investing in our people, our business, and our future."
The result:
"CEO who made millions in bonuses freezes staff salaries, claiming it's necessary for the company's future."
Maybe AI is the saviour of mankind.
And yet they don't have enough money to reward the people who actually produce the products they sell?
Yeah, a clear example of the value of measuring success using share price.
Rich lazy fucks want to suck the profit out of every business and are held up as examples of success while idiots who think they're in with a chance of joining the gravy train cheer them on. Meanwhile the plebs, who buckled down through covid and kept the business profitable, are told to go back to spending 3 hours a day travelling to a shithole office in a indentikit city centre of Costas, Starbucks and MaccyDs.
And relax!
" share price (investor return) is the No.1 measure of a CEO"
Well, sort of....
- Share prices increase or decrease mainly because of larger macroeconomic factors, particularly high market liquidity and low interest rates. Share prices are mostly moved by big institutional investors - mutual funds, pension funds etc. Individual investors barely move the needle unless it's a very hyped-up brand (Tesla and Apple come to mind). A much better performance measure would be inflation-adjusted share price movement vs an index of similar companies or the general market, instead of the absolute rise/fall. BUT you can bet your bottom dollar that the people in finance who buy and sell shares for a living will look at the performance of a company relative to their peers, and some of that will be taken into account.
- The first other big mover of share prices is dividends paid, but sometimes paying out more dividends now robs the company of the capital to grow in the future. So it's a reasonable indicator of success only if the company still has a healthy cash balance.
- The final big mover of share prices is performance vs analyst predictions, and this is really a mug's game, basically share price fluctuations as a result of other people's gambling.
Essentially the market incentives are such that short-term profit has a far larger effect on share price than long-term profitability. And honestly I don't have the visibility to Microsoft's inner workings to have any idea whether Nadella is a good CEO or not for the long-term future of Microsoft. But the market seems to be of the opinion that he's good for right now, and he's getting highly rewarded for that (i.e. as is understandable, people behave in ways that optimise their benefit based on the incentives they have)
The stated purpose of a business in the US is "Maximize shareholder value". This guiding principle has been paramount for some decades now and its actually taught as a business principle. It rather overlooks the crucial difference between money creation and wealth creation IMHO (but as I'm neither a leading economist nor a C-Suiter my opinions don't really matter). Its not a novel insight, either -- it was predicted well over a century ago that capitalism would degenerate to what was called then 'rentier capitalism' but what I tend to think of businesses trending towards the IRS (tax authority) as a model, always searching for maximum revenue for the absolute minimum of capital deployment and operating costs and so preferably not actually having to produce anything of value but rather tax others' efforts. (Which, when you think about it, is another name for outsourcing.)
From an investor's perspective the problem is steering clear of pure capitalist plays, instead focusing on enterprises that are still productive. The problem then becomes that there's far more investment money washing around than there is productive entities to invest in, hence a proliferation of 'financial products'. So the game really becomes one of trying to guess how far something like a Microsoft can go before it eventually implodes. (Use IBM as a guide....)
"share price (investor return) is the No.1 measure of a CEO"
Only to a certain extent. There are ways to boost stock prices that are short term and leave the company struggling before very long.
One of my investment criteria is dividends. If the only play is to buy and sell a company's stock, I see that as more like playing roulette. There's also be big danger of staying in a stock too long out of fear of selling too soon. With a stock that trades in moderate window that pays a dividend, money is always being made. All the stocks I'm holding right now pay a dividend and the companies are mind-numbing boring but have competent management and a conservative approach to risk. It's a tortoise and hare thing.
Maybe there is something else in this thinking. The people doing these jobs are in short demand so they get paid more so how do you turn that round? If you are paying them more then the likely option for them is to retire early making demand even higher. If they all get on the same page (as we have seen with recent redundancies) and start stagnating wages you now create a situation when demand isn't as high because people have to retire later and what better way to do it than while inflation is very high. It's not like Microsoft can't afford these pay rises. They did it last year and profits are still up 2bn. Just a thought.
@AC "It's not like Microsoft can't afford these pay rises. They did it last year and profits are still up 2bn."
Profits are actually down so far for the year. They are only up $2bn for Q3, over the 3 quarters they are down a little over $3.5bn, 6.6%.
But your right it is not like they can't afford these pay rises.
"it is not like they can't afford these pay rises"
Looking from a general business side, it's easy for an employee to ask for a raise when the company does well, but none of them are lining up for a reduction when the company does badly. Better to give a yearly bonus related to company revenue, which incentivises the employees but also protects the company from a downturn*. Of course in this specific case, "They can afford it" is understatement of the year. With average compensation of $190k and approx 221k employees, their wage bill is around $42bn (although probably closer to $50bn when you include social security, healthcare and other benefits). But still, a global 5% pay increase would be a bit over $2bn. Their yearly revenue is around $200bn with yearly *profits* of around $70bn.
*Of course it sucks that bonuses and rises are completely at the whim of the employer, it would work better for employee protection that rises are automatically triggered by for example rises in inflation, and bonuses are calculated automatically based on company income, and have those written in everyone's contracts (but that's also why US companies don't like unions - play the employees off against each other, divide and conquer)
What job exactly does leadership do ?
How does someone who doesnt REALLY understand software development actually make any sort of judgement ?
Balmer cant program, and wouldnt be able to do the most basic task on any software team besides a powerpoint, so how can he judge ? How exactly does he know whether to go left or right ? He doesnt he is just listening and guessing and hoping for the best.
You can split them into 3 categories but they often cross each one.
Hands on, Organise, Delegate.
You don't have to program to understand what a program does or what you want it to do. They have office which is pretty straight forward, they want as it a cloud based subscription service. it doesn't matter how they do it as long as they get to that. They also have windows which they want the same for but can't pull the trigger while Linux is nipping at it's toes so the idea with that is to monetize it any way they can till they have that option. Management makes judgement based on the advice given to them. It's up to them to decide it that is good or bad advice and then get others to act on it.
I think the pay they get is ridiculous for what they do but if you get someone who is successful and steers your (or the shareholders) company to profit then you are going to want to compensate them well because if you don't another company will come and take them from you with a better offer.
The problem with some of this is nepotism, classism and failures. Some are only there because of who they know or who their parents are which isn't right. Some just for going to the right school. Then we have the failures who are rewarded regardless and constantly get reemployed in the same roles even though they are useless. That's probably because they had one success and their career is built off that plus it's free publicity. I don't remember any share prices dropping when a new CEO has been named even if they are useless. Honourable mention to Baroness Dido Harding of Winscombe the conservative life peer married to an MP who moves from job to job where her only attributes are her connections in government and the ability to obtain obscene amounts of tax payers money for the whatever she is working on whether it's a failure or not. She also gives the conservatives her complete and utter support and has worked tirelessly to fuck up the NHS ready for privatisation.
That's work the leadership do is at the bequest of the owners and shareholders. Is it value for the money? No but someone has to sit between them and the workers and steer the company to profit. Even if they play golf 80% of the time and in the 20% they do what they are brought in to do then everyone's happy. Bonuses are the incentive. When someone already has a ridiculous amount of money the only incentive is an also ridiculous amount of money. In my line of work I've dealt with CEO's, CFO's, CTO's VP's and directors etc... and I've rarely met capable ones who know what's what and how to get across properly what they want but the majority put people below them that do. What is very wrong is when they lay off staff, cut or freeze wages and still take bonuses but again that's down to not wanting to lose them to another company. It is what it is.
Make lots of money, pay your staff well, foster loyalty trust and increase productivity. Increasing your profit and revenue and then saying we can't increase your reward for doing that just doesn't cut it. Nor does it make any real sense.
Yes shareholders I know, but am I naively missing something else? Do they really think that revenue and profit are going to be obliterated in the near future?
The last time I ever paid Microsoft for anything was 2020 (you know, the flight sim).
Once a long time ago I used to play Xbox 360 and I got swindled into paying $1.99 for one month of Xbox Live, with the stipulation that they would charge me regular rate for all subsequent months until the day I logged in to cancel the recurring payment scheme, which I attempted to do the very next second. Well I never was able to cancel those payments, short of telling PayPal they’re not allowed to grab any payments without authorization. So sure enough next month came, they triumphantly went in to grab another month, were denied access by PayPal, my Xbox live service was instantly shut off, and I have never been allowed to buy another single thing from Microsoft. Well you go to call in & the Microsoft lady says “nuthen can be done, any payment you send for anything will apply first to the outstanding balance, and you’ll probably have made only a partial payment for your purchase, which you won’t get until the full amount had been paid.”
(Honestly, I stopped caring years ago. Except for 2020. I had to buy that one through Steam I do believe. I guess if any other worthwhile product arises some day I might spend some time sorting it out, but I can sincerely predict that Microsoft never produces such worthwhile product ever again in my lifetime. I really do believe it.)
We got Magnum Brown, Shooshki Palooshki, Supercalafragahestikalagoothki, You could put that in your don't know what you said book, Took-look-yuk-duk-wuk, Innovative ill factors by the Flavor Flav, Come and ride the Flavor wave, In any year on any given day, What a brother know, what do Flavor say? Why do the record play that way? Prime time merrily in the day
Yeah, I'd take advice from this man.
Leadership is no different from the Kings of old Europe, they paid themselves crazy amounts when the truth is they are the least valuable in the big picture.
Leadership likes to make big public appearances, today they do powerpoint presentations pretending they are respionsible for all the hard work. They never mention the little people just like royalty name everything after themselves and never mention the poor workers who worked hard, ate nothing and died during said project. When things go wrong, in both cases they fire or punish the little people at the bottom. ANother similarity is they like to give themselves fancy titles...
CEO's are there to navigate the company on a path they believe is correct to grow the business and make money - nothing else. If they don't do this, they lose the faith of the board, shareholders and probably Wall St, and will be kicked out (unless you're Mark Zuckerberg, in which case you have the controlling board vote!)
Companies are now spending less in the cloud, either because they see it's just the never-ending money pit it really is and finally realize it's not all it was sold to be. Maybe this will continue, but I'm sure this latest AI craze will fire up people like Nadella into believing the next wave of obscene growth and profit is just around the corner.
"To remain a consequential company, we must maintain a leadership position in our at-scale businesses of today, generating enough yield to invest and lead in the next wave, while staying on the frontiers of both performance and efficiency. That is the context in which we're making decisions and investing in our people, our business, and our future."
Shit! I got BINGO on 2 cards with that one.
What I take away is that the CEO has informed his underlings that there will be no raises this year so if another job comes along that pays 10% more, has a better work environment or bennies, take it.
Apple learned to keep new Macs under their hat until shortly before release to avoid having a warehouse full of kit that nobody is going to buy while they wait for the new model to come out.
Many company policies aren't a good idea to announce publicly. They'd do much better to not offer any unsolicited raises and evaluate requests based on the person and that person's importance within the company if money is tight. Many people will never ask for a raise on their own. Some of those will just leave for another job so keeping up with prevailing wages is important as even the most land employee might wind up being very key to a department given some other people leaving and a few more out on some sort of leave or holiday. The last person alive on the bridge of a ship can wind up as captain no matter how junior they were at the beginning of their watch.
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