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Amazon hopes that additional layoffs will boost shareholder value


It was announced about a month ago that Amazon would be laying off more than 9,000 employees by the end of April, adding then to the 18,000 roles it already cut in late 2022 and this January. As cold as it may sound; the market loves layoffs because they boost the stock price of companies that administer the layoff, which in turn, increases shareholder value. On the worker’s side, these layoffs seem like career agony. Indeed, the tech industry increased its layoffs by 649% in 2022, which is the highest since the dot-com bubble more than two decades ago. More employees were laid off in 2022 than in 2020 and 2021 combined. Because the tech giants have many employees, a small percentage of layoff still translates to thousands of people losing their jobs.

Prior to the pandemic, many tech giants went on a hiring spree and hired a ton of workers. Most tech companies overhired, and this was the case with Amazon, Facebook, and Tesla. Amazon had more money than it needed. since its stock price was inflated. Thus, the company would hire anyone and everyone for any kind of position even if they clearly did not need to hire that many people. People were working remotely, shopping online, ordering groceries to be picked up or delivered, streaming movies at home, and taking classes online instead of in-person. The surge in online activity brought Amazon and many tech companies record-level profits and started a hiring frenzy to keep up with demand. Tech companies then thought that this would be the new normal, expanding their teams and growing quickly. As a result, Amazon and pretty much every major tech company hired new workers at a disproportional rate, and became overleveraged.

It is important to emphasize that many workers hired during the pandemic were not entry-level employees, but experienced software engineers and developers earning salaries in the six figures with generous benefits including stock options. As the reality of the post-pandemic period started to kick in, and everything was coming back to normal, Amazon and its tech peers, started to lay off their staff in a massive fashion. This layoff seems beneficial for Amazon’s shareholders because laying off a portion of its workforce will increase cash retainer even if demand remains constant.

Maintaining demand constant will maintain revenue constant. Even if revenue stays constant while expenses decrease, this allows the company to retain more money and increase its profits, which, in turn, increases the company’s stock price. Amazon decided to apply the do-more-with-less concept to maintain at the very least, if not, to increase efficiency and productivity. At the end of the day, Amazon seeks to please its customers and its shareholders. The Board of Directors believes that the company can sustain consumer satisfaction while increasing shareholder value. Thus, Amazon believes that laying off more people at the end of this month will enable the company to achieve both goals.

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