Is Sen. Warren right to criticize Disney for laying off 28,000 employees?
- As of October 14, there have been 8 million coronavirus cases in the United States, with 221,801 deaths.
- The Walt Disney company is worth almost $130 billion based on revenue and profits from the last three years.
- Although Disney World, Florida is currently open at 25% capacity, Disneyland, California’s opening is not promising as the state’s coronavirus case numbers still surge.
- In September, Disney announced that it would lay off 28,000 employees (most part-time employees) in the United States because of “capacity restrictions and lower attendance.”
- Senator Elizabeth Warren criticized Disney as “short-sighted” questioning their financial decisions saying, 'It appears that -- prior to, and during the pandemic -- Disney took good care of its top executives and shareholders -- and now is hanging its front-line workers out to dry.'
Senator Warren is wrong to criticize Disney for laying off 28,000 employees. Disney's quarterly earnings in 2020 are nearly $6 billion less than last year's second quarter and $7 billion less than last year's third. A combined $13 billion reduction in year-over-year earnings has consequences in the corporate world for a publicly-traded conglomerate like Disney. After all, it is ranked #49 on Fortune's list of the 500 largest US companies.
In order to quell its outflow of cash, Disney made some prudent financial moves. Namely, it suspended its dividend and shed staff chiefly from its business segments that have been adversely affected by COVID-19 lockdown restrictions: Parks, Experiences, and Products (i.e., Disney World and Disneyland), and Direct-To-Consumer, a.k.a. stores.
Disney would rather reopen its theme parks and stores to full-capacity (and retain its employees), but lockdown policies favored by Senator Warren and her fellow Democratic governor, Gavin Newsom in CA, have kept Disneyland closed since March 14th. To add a little more context to the Disney layoffs, 67% of the affected staff were part-time employees. Disney has announced that it will 'provide severance packages' and assist affected staff in finding new employment. Additionally, the company had furloughed employees during the extended lockdown period but continued to pay '100% of their health insurance costs.'
With the election three weeks away, Senator Warren is clearly using the timing of Disney's layoff announcement to whip up support among the Democratic base. She wants to cast Disney as the heartless corporation kicking its employees to the curb while hoping that voters forget that it was primarily the lockdown policies supported by Warren and her supporters that forced Disney to make the cuts.
Senator Elizabeth Warren was rightfully harsh on Disney after learning that they laid off 28,000 employees nationwide. After all, it is the same company that awarded its shareholders $47.9 billion in share buybacks in the past nine years, and, as Warren claimed, 'showered' its top executives with excessively high salaries and compensation packages. Between 2018 and 2019, Disney directed dividend payments of over $5 billion to its shareholders, which cut the pay of over 100,000 workers.
In the wake of the coronavirus epidemic, Disney's top executives, such as CEO Bob Chapek and Executive Chairman Bob Iger, welcomed massive pay cuts. However, this act of 'charity' is misleading because the executives' original salaries are only a small fraction of their annual compensation. The majority of these executives' earnings come in the form of compensation packages (over $338 million) and stock rewards that they have in the company. Warren wrote that '...thousands of laid-off employees will now have to worry about how to keep food on the table as executives begin receiving hefty paychecks again.'
Warren explained that while Disney blamed their decision to lay off so many employees on California's public health measures, they also laid off 6,400 employees in Florida, a state that is already in Phase 3 of re-opening. This is yet another example of Disney abandoning their employees in a time of need in order to appease those with a higher standing in the company. And Senator Warren's criticism of such practices is certainly well-deserved.