Saturday, March 4, 2017

When employees get less than shareholders

When employees
get less than shareholders


I have always find it puzzling each time a public listed company announces its full year result's earnings and decided to pay our more than its actual earnings. Is there anything wrong for the companies to do so?

While shareholders are rejoiced of the dividends knowing the company they invested earned less and yet decided to pay more actually, the same cannot be felt by the employees of that particular company concerned.

Worse still, if the employees' benefits like bonuses are reduced in that particular year.

My good friend working at the Star Media Group Berhad has informed me that the leading English newspaper company has been cutting bonuses over the last  few years in tandem with continuous weakening advertising expenditures.

He said bonuses of five to six months  or even more during the last fifteen years has been reduced drastically especially in the last three years.

Gone were the days when apart from its usual two months bonuses paid in every December, the additional bonuses usually paid in January (just nice for Chinese New Year celebration's expenses) and another one in September (in conjunction with Star's birthday celebration).

During the birthday celebration of Star, employees and ex-employees are treated to a sumptuous buffet spread. One can imagine the enjoyment during the feast knowing a "birthday" bonus is there in the pocket.

That is not all. In between the January and September bonus, it is expected to get another one or two months bonus as well. But all goodies finally come to an end. First its birthday bonus were gone three years ago, then its January's bonus was also gone the following year. Then the final curtain came down when the in-between bonuses were gone as well.

It was replaced by bonus based on individual's key performance index and it is anyone's guess that such system is always welcomed by the employees as individual's  evaluation can be very subjective.

Another freelance writer lamented about his drastic commission reduction for his once or twice articles published in the paper has seen his fee cut by 50%. Reason is his article is no longer in the main paper and has been move to the Metro pages. But a 50% cut is actually a big figure for anyone. Imagine this happening to your income and how are you going to find the motivation anymore?

Further utilisation to the maximum of staff also occurred recently. A sport reporter who has been covering sports has been directed to cover daily happenings as well. This "new directive" is perhaps to save cost as there are days when no major sports events are going on and hence it is better to use the sport reporter. Well, he resigned in apparent of not happy with this so called "new directive."

While all such known cost cutting measures were being carried out in a bid to reduce operation costs, it is utterly puzzling to me that Star didn't preach what it does when it comes to paying out dividends.

For Financial Year 2016, it is paying out a total 18 sen dividends when it actually earned only 14.89 sen. In short, it is over-paying out from its cash reserves which has been dwindling down from RM632 million a year ago to RM499 million as at end of December 2016.

In 2014, it also paid 18 sen dividend when it earned 15.1 sen only. Will such trend of paying more than it earns continues again in the future years for Star?

Meantime, there would be new ways of cost cutting measures being implemented over the times to come for its employees. I just hope it won't come to one day when there would be totally no bonus to be paid out to its employees.

After all, its main print business segment is experiencing a continuous declining revenue and profits over the last few years. To sum it up how tough it is, its Financial Year 2016's normalised earnings dropped by as much as 49.5% compared to 2015.

Coincidentally, the freelance writer's commission also dropped by as much as 50%, an almost identical percentage.


1 comment:

  1. Kassim in that case your friend shld be a shareholder instead of a worker..dividend yield is 7.5%!