Meta Platforms Inc., widely known as Facebook Inc., recently fired 11,000 employees.
Last Wednesday, CEO Mark Zuckerberg said in a letter to employees, “Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13 per cent and let more than 11,000 of our talented employees go. We are also taking a number of additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.”
Facebook crashes
The stock, which plunged from a year-high of $353.83 to $88.09 losing over 75 per cent, reacted positively after the sacking announcement. It has jumped nearly 27 per cent since then to $111.87.
One cannot try and rationalise the stock market reaction to such developments. For markets, future growth and financials of a company (earning per share) are paramount factors. It’s not just Meta Inc. There are several examples, including Intel and Apple and other FAANG companies. In India, too, there are several examples.
For any company laying off employees is the toughest decision and they would do only as a last resort. A continuous fall in stock price can be trigger to tough decisions for many corporates, as they are answerable to their shareholders. But counter-parties who step in to stop a free fall can sometimes help.
ESG asset base
ESG funds with total assets of $2.47 trillion globally, could play an important role here. In India, assets under management of ESG funds stand at around ₹12,000 crore.
True to its label, ESG funds consider environmental (corporate climate policies, energy use, waste, pollution, natural resource conservation and treatment of animals), social (ethical supply chains, avoiding suppliers with questionable workplace safety or employing child labor, support LGBTQ+ rights and encourage all forms of diversity) and governance (such as diversity on board of directors and transparency) as investible factors.
Perhaps the time has come to expand the “socially responsible investment” theme to include a company’s people policies as well. The people policies can be measured in terms of employment generation, treatment of employees, and so on. Large employers should get a higher weightage in ESG.
If ESG funds give weightage to “staff strength” as one of the criteria, it would definitely help stock prices of companies stabilise from vertical falls and act as a deterrent against whimsical firings.
According to Morningstar data, ESG funds attracted a net $120 billion in the first half of 2022. In India, too, ESG funds are attracting flows. That’s big money that can help companies also become more socially responsible.