I’m not sure a correlation between stock price and payroll actually exists

payroll

Of course Stuart might just be using this as an excuse for payroll cuts that were going to happen anyway, but Marla doesn’t seem to be interpreting it that way and why would Stuart resort to weird excuses anyway?

I see this as part of the Questionable Economics trend begun a few days go by Tiffany in LuAnn.

19 Comments

  1. I think there probably is a correlation. The stock doing badly is a sign that the company isn’t doing well, and companies that aren’t doing well are more likely to need to cut payroll.

  2. Very good, but the causality in your interpretation is exactly the opposite of the one implied in the strip. Just sayin’.

  3. There are a few ways..
    Company can’t issue stock & financing gets more expensive, lenders more demanding. Grumbels is already closing stores, so this one is fairly likely.
    Cost cutting is done to impress investors and protect executive bonuses
    Lower stock prices lower reputation & hurt sales (A stretch, granted)

  4. A dip in stock price, especially one clearly caused by a scandal such an executive getting caught with his hand in the cookie jar, is not an indication that the company’s in trouble.

    Unless he embezzled $10 billion dollars and the company can no longer pay its bills.

  5. Bill: I disagree. A change in stock price isn’t a random event. It reflects analysts’ understanding of the value of the company, and how the value of the company has been affected by certain events. If an executive scandal causes the stock to dip significantly, that means analysts have a collective understanding that that scandal will ultimately effect that company’s bottom line. (Or course, that understanding could be wrong, but it doesn’t generally strike me as safe to assume that it’s wrong.)

  6. WW: I guess you didn’t, but Icertainly did when I read your interpretation; I liked your take, because I hadn’t really considered it, but based on my preconceptions, I did see a direction of causality. My preconception: the strongly implied direction of causality in the strip (the stock price has gone down, therefor the company has less money, therefor they will be laying people off) is wrong. The company has just as much money as it ever did from selling the stock initially — once sold, the stock is no longer the company’s; if it goes up, the gain is whoever’s who bought the stock; if it goes down, the loss is whoever’s who bought the stock. There might be correlation with the performance of the company, but in my mind it runs only one way: first the company does something, then the sock price reflects it. Your interpretation fits with that line of causality: the company is doing badly, that get’s reflected in the stock price; the stock acts as sort of a tunnel canary, indicating the underlying cause, ie: something the company did.
    But nb: the reason for the layoffs are because the company is doing badly, not because the stock price went down.

  7. (totally off topic, but in my last comment I wrote the rather awkward, “the loss/gain is whoever’s who bought the stock”. I was debating whether to use “whoever” or “whomever”, and settled on “whoever” because the verb is “is”, ie: “to be”, and that verb supposedly takes the subject case, not the object case, in English. But I realize that it is not really the verb “to be” in the common sense, and the second noun is actually in the possessive case (“the loss/gain is hers”, not “*the loss/gain is she” nor “*the loss/gain is her”)! Which leads me to wonder what the possessive case of whoever is: “whosever”? “Whosever’s”? I guess “whosever”… Anyway, weird case; I guess if I’d said “the loss/gain belongs to…” I could have avoided the use of the possessive case.)

  8. When a company cuts payroll, especially by way of a big layoff, usually the stock price goes up. So if the stock price is going down, expect payroll cuts to make it go back up again.

  9. How about “whatever”? 🙂

    Companies fire workers all the time when they want a stock price bump. It’s pretty much a guaranteed boost. So, the decision is not based on anything about how the company is running, but is just cheating at the casino which is the stock market.

    Example: When I worked for a multinational multi-billion dollar financial institution with HQ in Canada, there was a change of CEOs. After the previous CEO was truly out the door (and he wasn’t so bad, as far as those types go), the new CEO commenced a slaughter on a massive scale, firing about 3,500. staff across the country. Why did he do this?

    Was the company in financial trouble and losing money?

    No. The company was profitable.

    Was the company not growing?

    No. Revenue was increasing.

    Why then, did he choose to destroy 3,500 families?

    Because the forecasts suggested that revenue would not grow as quickly as he would have liked.

    So, 3,500 were deprived of their livelihood. The company got a nice stock price bump. The CEO had the nerve to take a $10,000,000 bonus.

    Of course, many of the people fired were actually needed to do the work of the company, so soon after “contract staff” were brought in to do the work in a state of almost perpetual employment (once it gets to the point where the company is legally required to hire them, they let them go and hire new ones). These staff cost the company more than employees, but the books showed we were a “leaner, more agile organization, ready to synergize the future with proactive upsides”. Thank goodness I eventually escaped.

    Which raises the question, which looks better on a banker, a doberman or a noose?

  10. Definitely one the things I don’t miss now that I’m no longer a productive member of society is the mandatory training at MegaCorp. That includes ethics. Like Marla, we had cases over the years where some high-level executive, including the CEO a couple times, did something bad. So they would intensify ethics training to show the commitment to ethical behavior. I think they should have just dragged everyone of Vice-President and up to a 48 hour off-site and trained THEM. Then we could have kept, you know, doing the real work.

  11. Once at the place I was working, some money was stolen. So the bosses (there were far too many of them) decided to change the combination of the safe, giving the new combination only to the bosses.

    A week or so later, more money was stolen. As one of the rank-and-file who’d been questioned in the previous disappearance, I was .. er, really, really sad that the company lost money again. hehe

  12. The supermarket that I worked at (my first job not working for my dad) had a bad system – based on what I heard about while working there and what went on for cash drawers (and back then they did not take credit cards and debit cards were far in the future, so it was cash or check).

    We were allowed to be out up to $1 either way in drawer at the end of the day. We would count $100 back into the drawer and had over the rest cash to the “cash room” staff. The staff person would then count what was given to them and either tell one that their drawer was right (meaning within the $1 allowance) or there was a problem. I would count the money into the drawer and hand them the drawer at the same time I handed them the cash. (And yes I was sometimes off within the $1 – generally an amount I knew I would be out due to not having the right change towards the end of the shift and handing over a tiny bit more than I should – say a dime instead of a nickel.) What some of the “girls” figured out was to count the $100 into the drawer, then take $1 from the money they were handing in and not hand over their drawer until they were okayed. If the cash room person said they were short they would “recount” their drawer and find the “missing” dollar – “Oh, I miscounted the drawer”, hand them the dollar and then their drawer. If, however, the drawer was counted and found to be right, they would turn in the drawer and walk out with the $1 in their pocket. (Okay a dollar was worth a buck then.) Then one day someone shorted the drawer before they turned it in and after that we had to put our names in the drawer when turned it in.

    Then one night, after I had switched jobs to another retail job, the front end manager and the cash room manager left for the evening, then returned and robbed the supermarket!

  13. The accountant I worked for had a partner and sometimes I would be “lent” to the partner. The partner had a client in construction. They had three different sets of checks going through the same checking account. Their regular checks, their payroll checks and checks that handed signed and blank to employees when purchases needed to be made. The bookkeeper did the bank recs. The bookkeeper went on vacation and they needed a copy of a check so they opened the bank statement and found the check they needed. They also found that one of the signed/blanked checks was missing from the statement and they had no matching bill to that check. The signed/blank checks would be given to an employee and then either the paid bill would be given to the bookkeeper or the blank check would be returned to her.

    So I got sent in to see what I could figure out. (Forensic accounting!) Part of this was for me to play dumb and friendly with the bookkeeper. Went out to lunch with her and such. I started finding that every month there was one of these checks missing from the statement. In addition on the books the matching check by number was a different (lower) amount. There would also be a check with a number that was not listed on the statement. I noticed that the two checks each time would total the amount for the check on the bank statement and that the second (non-existent) check’s number had the last two digits reversed from the missing check – 1751 and 1715 for example. The bookkeeper was stealing every month. (Hence why one should never trust a bookkeeper who does not take a vacation – because if this one had not done so, this would not have been found. When confronted she said she had receipts for the checks at home and then never came back. They did not have her arrested nor did they get their money back.

    What they did do was prompt the assistant bookkeeper (most clients I have worked with barely have a checkbook – no bookkeepers, let alone two of them) to bookkeeper. Apparently she had known what was going on – or had been in on it, as the same continued with her!

  14. The agency Robert ran added a Saturday program for life skills and socialization for the kids who were the clients. He had one of his regular employees running the program and working with the children. There was a bookkeeper just for the program – I am not sure if he hired someone for it or it was one of the other (non-bookkeeper) employees who served as the bookkeeper.

    Somehow – maybe an audit – it was found that there were payments being made that did not seem right. The employee running the program was called into his office and she insisted she knew nothing about a number of bills – even though her signature was on the form they had for payment of the bills. Robert figured it out. The bookkeeper had taken one of the signed forms and photocopied it – then whited out all but the signature. If he held the forms up to the window everyone of the forms in question had the exact same signature on it! After that (in the days before color copies in offices) the signature had to be done twice – once in black for the county and once in blue for the program.

  15. Lastly, I promise, the small RV we have is converted from a van (Chevy Express in our case) to an RV in Canada. The original family of owners sold the company after we bought it . At that time the manager who was running the Canadian company came online and would answer questions and such with the owners and would be owners. He would get a bit nasty if someone complained about anything and he and Robert butted heads online any number of times – if one did not treat him in a godlike manner, forget about any help. The company was then sold again to a large European RV company and this fellow still ran it.

    This past year the company was sold again. After the sale it was found that this fellow had been stealing from the company since he started – enough for the new company to need to put it into bankruptcy. All the employees laid off. Panic among owners of the RVs. We are off of the warranty, those on warranty would have none. If you wanted to sell yours – this was hanging over the sale. Most of the parts are general RV parts, but some – including outside decorative/protective compartment doors, the plugs in the water filling holes, the electronic information panel to check on water and battery levels, etc. are proprietary to the company. If the company goes out of business and one’s outside storage compartment door breaks – try to find someone to duplicate it for you. I told Robert that the company itself was a good company and while its reputation is not what was it was before the yahoo got his hands on it, it still was making a good product and someone would buy it at a big discount. Supposedly they are now in negotiations for same.

    So the fellow with his hand in the safe (or more likely juggling the books as it is not a cash business) certainly affected the value of the company.

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