On Tuesday, Sony announced layoffs that will impact 900 jobs in its PlayStation division, or about 8% of the unit’s staff worldwide. The move follows other video game layoffs this year, such as Microsoft’s decision to lay off 2,000 people in its gaming division and Unity Software’s “corporate reset” that resulted in the elimination of 25% of its workforce.
Faced with layoffs, some employees are wondering why some CEOs aren’t taking pay cuts, similar to what former Nintendo CEO Satoru Iwata did in 2013, when he took a 50% pay cut to avoid layoffs.
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Iwata stated at the time that although “some employers advertise their restructuring plan to improve their financial performance by firing a certain number of employees,” he decided not to do so because “at Nintendo, employees make valuable contributions in their respective fields, so I believe that firing a group of employees will not help strengthen Nintendo’s business in the long term.”
Satoru Iwata, former president of Nintendo Co., speaks during an interview in Tokyo, Japan, Thursday, May 8, 2014. Credit: Tomohiro Ohsumi/Bloomberg via Getty Images
Some CEOs have already followed suit.
Zoom CEO Eric Yuan took a 98% cut to his $301,731 salary last year and opted out of his 2023 company bonus after the company laid off 15% of his team, i.e. around 1,300 people.
In a 2023 Resume Builder report, 66% of executives surveyed said they had taken pay cuts in the past six months, 94% of which said it was to prevent or reduce layoffs.
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However, salary is not the only means of compensation for a CEO, so some pay cuts are not as sacrificial as they seem. Yuan, for example, directly controls more than 13% of Zoom, according to Bloomberg, which estimates his fortune at $5 billion. And CEOs still earn nearly 400 times more than the average worker.
Here are two reasons why CEOs may not reduce their salaries to avoid eliminating jobs:
1. It doesn’t add up
CEOs who don’t take pay cuts might cite economic reasons. According to Chris Williams, former vice president of human resources at Microsoft, some CEOs may believe that cutting their salaries in half would not have the same economic impact as laying off employees; the numbers would not balance.
At companies like Google or Microsoft, eliminating 10,000 employees “saves about a billion dollars a year in costs,” Williams wrote on Business Insider. “Fully cutting the CEO’s salary would save only 0.2%.”
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2. Companies don’t need to retain existing talent
Iwata took a pay cut to keep morale high while Nintendo employees worked on the profitable Switch console, released in 2017.
Nintendo “had to retain that talent,” executive coach Rohan Verma told CNBC, and a CEO who follows Iwata’s lead by cutting pay needs to make sure “the company’s strategy is still valid, or that the products that are offering are still valid.” right for the market.”