Meta (META) and Starbucks (SBUX) Show That Cutting Jobs Leads to Bonuses

24/7 Wall St. Key Points:

• Meta (NASDAQ: META) plans to cut 5% of its workforce while offering top executives bonuses up to 200% of their salaries, highlighting cost-cutting efforts alongside executive incentivization.
• Starbucks (NASDAQ: SBUX) recently laid off 1,100 employees, focusing on trimming middle management, while grappling with rising coffee prices, which have surged 50% this year.
• Both companies are navigating cost pressures by streamlining operations, though executive compensation amid layoffs may draw investor and public scrutiny.
• If a crisis is around the corner, make sure you speak to a financial advisor and make sure you’re positioned to weather the storm. Smart Asset can connect you with 3 serving your area in just a few moments. Click here to get started (sponsor)

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Transcript:

[00:00:04] Doug McIntyre: So Meta, owner of owner, of Facebook, among other things founded by Zuckerberg in his room in Harvard, I think, in 2004 is now the second richest man in the world. He’s made some personnel changes and some comp changes at Medic. Can you fill us in?

[00:00:24] Lee Jackson: Well, yeah, I saw, which I thought was interesting, that they were going to try to cut 5 percent of the workforce, which I’m sure is tens of thousands of people because they have a huge employment.

[00:00:37] Lee Jackson: And yet, strangely enough, for some of the top execs, they’re in line to get as much as a 200 percent of their salary bonus. So boy, if you lay off a big chunk of workers, worker B workers, and, really reward the upper level or upper management executives, that, that can’t go over real good,

[00:01:02] Doug McIntyre: But it happens all the time.

[00:01:03] Lee Jackson: Oh yeah.

[00:01:04] Doug McIntyre: You’ll notice the new CEO at Starbucks who got that 90 million plus package just laid off 1100 people at Starbucks. And they also said they wouldn’t fill most of those unfilled jobs. So he’s probably knocked out a thousand jobs, plus job opportunities for another 500 people. So he was paid well.

[00:01:26] Doug McIntyre: Paid well, but listen, it was ever with us, you get paid a lot of money to be a CEO. The day comes and you have to bring down costs, save your job. You take everybody who’s not, the CEO and you fire ’em all, or you somehow cut their pay.

[00:01:42] Lee Jackson: Well, and again, a lot of ’em are middle management people, hacks that don’t do a lot.

[00:01:47] Lee Jackson: You can’t get rid of all the baristas because they’re the one making the Joe, but. there’s probably he probably came in there from Chipotle (NYSE: CMG) and just said, Oh, my God, look at the waste in the mid management sector and just started chopping at once. And they’re going to have to because Starbucks is I mean, I think they had an okay quarter, but everything that used to be nice and pleasing about going to Starbucks just turned into a nightmare.

[00:02:18] Doug McIntyre: Well, they’ve got a big problem and that is, is that the price of coffee is up, I think, 50%. It’s huge! Already this year, and that’s one of these tremendous pricing problems. If you raise the price of the coffee you sell as much as the wholesaler charged you, customers are going to get torqued off.

[00:02:37] Doug McIntyre: Now, I suspect that the Starbucks people are smart enough both to source coffee and to buy it well in the future at a fixed price So they may not be suffering 50% But they’re suffering.

[00:02:51] Lee Jackson: Oh, absolutely. And yeah any business that’s commodity You know driven they hedge coffee prices and they can sell forward contracts or buy forward contracts. So yeah, you’re probably exactly right but still it’s going to go up and Starbucks over the last five to 10 years has gotten very expensive.

[00:03:12] Lee Jackson: I mean, it was 20 years ago. It wasn’t that bad to go in and get a Venti Starbucks drip, but it’s, gotten a lot more expensive. And just like you said, coffee at the stores gotten has doubled.

[00:03:27] Doug McIntyre: It’s unbelievable.

[00:03:28] Lee Jackson: Yeah, it is unbelievable. And it’ll be interesting to see how this turns out because they were just trying to really simplify the whole Starbucks everything, they’re trying to go back to the basics that got ’em there in the first place and that’s probably not a bad plan.

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