Cooperate Downsizing essays

Cooperate Downsizing essays The U.S. economy was at the height of economic expansion, stocks were near all time highs, corporate profits were strong, and the unemployment rate was at its lowest in two decades. At the same time, the major corporations in the United States were firing workers by the hundreds of thousands, and job insecurity had risen to an extremely high level. What was also ironic was the fact that the corporations who were initiating the downsizings were considered to be some of the strongest and most profitable in the country. Although these events seem to be inconsistent, this is what has happened throughout the decade of the 1990's. Traditionally, downsizing was a direct result of a decline in the demand for a firm's product and a tool for company survival. The first duty of an organization is to survive. Downsizing is a legitimate tool for survival but not necessarily the best choice for every circumstance. This would mean that fewer items needed to be produced, therefore less employees were needed. Downsizing was also used as a way to cut costs during times of recession. But, the downsizings observed in the 1990's did not fit this mold. Instead of downsizing for survival, companies were using this as a strategic plan for creating an increase in stock prices. The intent of downsizings by these top corporations who were already very profitable was to become "lean and mean". Downsizing will be examined as a strategic option that management can exercise in order to boost equity value. Downsizing is defined as a reduction in the number of employees, and sometimes in the number of operating units within a company. It began as a strategy of weak corporations as a way to reduce the costs of the company. Shareholder wealth was the main concern, and companies were willing to do whatever they thought necessary to convince the market that the stock price should rise. The stock price had become more import ...