A question with no correct answer - Profit Maximized or Workers Welfare?

[ElFenix]

Originally posted by: torpid

How do you know they risked any money? How do you know that they created the jobs? What if they just bought the company from someone else?

you obviously don't know what risking money is. buying it from someone else is still risking money. they put their money in, thereby risking it for failure of the business. if their investment banker's opinion was wrong, and the business doesn't do as well as predicted, they're going to lose money.

As an owner I wouldn't line my own pockets at the expense of the company. That doesn't even make good business sense.

there is a lot of good, proven financial theory that says draining all excess cash out of a business is a good idea in certain situations (like the above where the company is content to be fat and happy)

this doesn't even say what kind of profit is being made. is the 'profit' made here merely an accounting profit or is it a true economic profit? for all i know not firing workers is actually losing money.

 

[ElFenix]

Originally posted by: EatSpam

Originally posted by: JLGatsby
Only a commie would saying keep all the workers.

And only someone with no imagination or intellience would rule out that possibility. There are other ways to improve profits without axing staff - and if they're good staff, you create a need for them and hopefully improve profits in the process.

Layoffs should never be a first choice. They hurt morale and therefore worker productivity and send your workers, especially the better ones, scurrying to find more secure employment. Loss of the workers that know your products best could hurt profits more in the long run, but unfortunately, most CEOs don't see past next quarter and their big, fat bonus.

as simplified as the problem was, the obvious answer to the question is that this number represents the present discounted value of all future profit, not merely what happens 'next quarter', and so would take into account worker morale, worker marginal utility, etc.

 

[ElFenix]

Originally posted by: torpid

Originally posted by: CPA
If they bought the company from someone else, then the still risked their own money.

What if they bought it for $1?

then they'd be dumb not to sell it immediately for its true value.

 

[ElFenix]

Originally posted by: spikespiegal

They took the ris, the deserve as much profit as they can generate. The workers can look elsewhere if they want. And if that happens, the owners will have to compensate.

What risk? Please read above. The only 'risk' being made with large, public companies is that their stock value will decline. They could give a sh^t if the company makes 10% less that quarter. Large investors typically aren't at risk for anything anyways.

Mosts CEO's respond first to stock value fluctuations, and will do whatever they have to keep the price of stock elevated. This often involves doing large scale lay-offs and reorganizations to make stock analysts happy when in fact it's overkill.

large investors are still subject to alpha risk. and, in fact, the market will only compensate you for alpha risk.

 

[Dissipate]

Maximize profit.

 

[everman]

With today's very low unemployment, I don't see much of a problem in maximizing profit, finding a better paying job shouldn't be too hard. Notify them 2 weeks ahead of time, and give them an extra week of pay when they leave.

 

[imported_malcontent]

I voted no layoffs, only because I don't have enough information to make an informed decision.

 

[crystal]

Since the company still making a profit - no layoff.

BTW, a lot of company already looking to maximized profit, i.e. Dell tech support in India is one example. A the consumer, you have learn to deal with it because from the company point of view, maximized profit is number 1.

 

[BurnItDwn]

Originally posted by: b0mbrman
From the OP: "The work requires only a low level of skills: each worker needs only one week of training",

After 1 week of training they are still going to be noobs and not as effective as the veterans that know all the tricks of the trade.

Originally posted by: b0mbrman
And if those people who could be laid off can find better employment, why haven't they left already?

If they don't get laid off then I'd say they have a pretty good employer.
If they were to get laid off, then they probably didn't know it was going to happen when they first took the job, thus, they had thought initially that they were with a good employer. Obviously not everyone is going to find a better employer, however, some are sure to.

Originally posted by: b0mbrman
In what world are administrators easier to train and replace than low skill laborers making more than minimum wage?

I didn't say train and replace. I just meant to suggest that cutting the low wage guys at the bottom is always the popular thing for companies to do, however, there's usually a LOT of redundancy in the administration, and it often makes sense to start at the top when downsizing, and work your way down. Phase out all of the useless middlemen.

 

[zugzoog]

Originally posted by: dug777
offer pay cuts 😉

If they don't like it, fire them 🙂

You have been inspired by the Cowra Abbatior haven't you? 😛

 

[b0mbrman]

Originally posted by: BurnItDwn
After 1 week of training they are still going to be noobs and not as effective as the veterans that know all the tricks of the trade.

So when layoffs occur (remember, we're operating at too high a level, not too low), fire the workers with the least experience.

Easy enough.

If they don't get laid off then I'd say they have a pretty good employer.
If they were to get laid off, then they probably didn't know it was going to happen when they first took the job, thus, they had thought initially that they were with a good employer. Obviously not everyone is going to find a better employer, however, some are sure to.

Yes, I should hope they would realize that their lack of skill (or their outdated skills) are hindering them in a modern job market. Hopefully, this will lead to them seeking higher education or some form of technical training.

Being low skilled certainly makes one expendable 🙁

I didn't say train and replace. I just meant to suggest that cutting the low wage guys at the bottom is always the popular thing for companies to do, however, there's usually a LOT of redundancy in the administration, and it often makes sense to start at the top when downsizing, and work your way down. Phase out all of the useless middlemen.

Where does the problem say there are useless middlemen? I could just as easily assume that there are none.

Or, perhaps most sensibly, I could assume that this profit maximizing chart in relation to low skilled workers is independent of other factors.

 

[PlatinumGold]

if you think about it, the discussion in that thesis is really, Sams Club vs Costco.


maximize profits or maximize benefits to workers.

 

[chambersc]

Originally posted by: PlatinumGold
if you think about it, the discussion in that thesis is really, Sams Club vs Costco.


maximize profits or maximize benefits to workers.

walmart v costco...hmm. interesting.

 

[ElFenix]

Originally posted by: PlatinumGold
if you think about it, the discussion in that thesis is really, Sams Club vs Costco.


maximize profits or maximize benefits to workers.

actually costco makes some pretty good profits vis a vis sam's club, iirc.

 

[JS80]

Originally posted by: torpid

Originally posted by: purepolly

Originally posted by: torpid

Originally posted by: purepolly
Lay some off and let them collect unemployment for a time and call them back and then off another batch and repeat the process.

I worked for a company who used this strategy and everyone loved it. The company would make up the difference in pay so we would always have a full paycheck - and everyone was thrilled to have the extra "vacation" time.

Ahh, the good old days.

Define "Make up the difference". Having so many people on unemployment will greatly increase the cost of unemployment insurance for the company.

The company use to cut a check for the wages lost when we got called back, simple enough

Just making sure you didn't mean they would pay the employees under the table while unemployed, as that would be illegal in numerous ways for both parties involved.

What he's describing is borderline illegal I would assume...

 

[JS80]

I would have no qualms bc unemployment would take care of them. Although I am a hard-line capitalist, I PERSONALLY would try to make some deal to keep as many people as possible. I do believe morale has monetary value.

HOWEVER, I in NO WAY would allow the LAW to say who an employer can or cannot fire (LIKE FRANCE).

 

[brxndxn]

The question is purposely leaving out variables.

The purpose of any publicly-owned company is to MAXIMIZE SHAREHOLDER VALUE. However, since the company is owned by three families, the decision should be made to maximize the value of the company... just like a publicly-owned company.

Though, the families would ultimately get that decision.. To look at a company at a single point in time is as ignorant as trying to determine the speed of a baseball from a single photograph (that shows no visible distortion). Where some owners would prefer the company make a meager profit while employing lots of workes, most would prefer larger profit.. But until the wants of the family are stated, then the answer does not yet exist.

So, really.. anyone that thinks they could make that decision from just the information given is undeserving of the position of vice president and should be promptly fired.

 

[spidey07]

Originally posted by: brxndxn
The question is purposely leaving out variables.

The purpose of any publicly-owned company is to MAXIMIZE SHAREHOLDER VALUE. However, since the company is owned by three families, the decision should be made to maximize the value of the company... just like a publicly-owned company.

Though, the families would ultimately get that decision.. To look at a company at a single point in time is as ignorant as trying to determine the speed of a baseball from a single photograph (that shows no visible distortion). Where some owners would prefer the company make a meager profit while employing lots of workes, most would prefer larger profit.. But until the wants of the family are stated, then the answer does not yet exist.

So, really.. anyone that thinks they could make that decision from just the information given is undeserving of the position of vice president and should be promptly fired.

ummm, more profit for the win?

how is this so difficult?

It really is that easy. The bean counters have done their work and say my max profit is from letting people go.

this is a no brainer IMHO.

 

[brxndxn]

Originally posted by: spidey07

Originally posted by: brxndxn
The question is purposely leaving out variables.

The purpose of any publicly-owned company is to MAXIMIZE SHAREHOLDER VALUE. However, since the company is owned by three families, the decision should be made to maximize the value of the company... just like a publicly-owned company.

Though, the families would ultimately get that decision.. To look at a company at a single point in time is as ignorant as trying to determine the speed of a baseball from a single photograph (that shows no visible distortion). Where some owners would prefer the company make a meager profit while employing lots of workes, most would prefer larger profit.. But until the wants of the family are stated, then the answer does not yet exist.

So, really.. anyone that thinks they could make that decision from just the information given is undeserving of the position of vice president and should be promptly fired.

ummm, more profit for the win?

how is this so difficult?

It really is that easy. The bean counters have done their work and say my max profit is from letting people go.

this is a no brainer IMHO.

No. Maximizing shareholder value and maximizing profit are two different things. For example, if I were to sell off all assets to the company for a single-exercise profit of $100 million, the company would lose all ability to generate profit in the future, thus ruining shareholder value. Maximizing shareholder value is all about position the company for profit now, with possibility of growth in the future.. The variables given in the question are severly lacking in the area of deciding where the layoffs put the company in terms of the future.

If the company were to layoff a ton of employees, maximizing profit now, the company could suffer a huge potential loss if the market suddenly rebounded. The question says nothing of how quick they can rehire employees. Sure, they only need one week of training - but the question says nothing about the ability to rehire for the future.

But, like I said, if the 3 families that own the company would rather the vice president produce higher profits by firing employees, then the VP should do so. It is the VP's responsibility to exercise the wishes of the owners of the company within the confines of acceptable business practice.

I mean.. this question is really not complete in any way and that's why it cannot be answered. There's a flaw with the question..

It's like asking 'What's the last digit of pi?' The question is wrong since it assumes information is available that is not.