Verizon Ad in the WSJ

There is a huge ad on page A11 of the Wall Street Journal today. The ad references this site which criticizes Verizon for making $4 billion in profits, but eliminating thousands of jobs. The ad also says that "real people, in real diners are concerned about Verizon cutting jobs and gutting service. Wealthy, profitable corporations have no business treating workers and customers like this."

There are several things to note here. First of all, the numbers are a little high according to what I found in the proxy statement, in part due to estimates on the value of stock options. Secondly, if this job cut really affects customers by decreasing customer service, the Verizon execs will pay for it, as will the shareholders, because customers will leave the company.

Now I agree that many many many executives are way overpaid. I think there are plenty of people who could do the job of CEO at a Fortune 500 company, but just aren't given the chance. But, at the same time, companies don't exist just for the employees. No one ever says "hey I have a great idea – let's start a company so that we can employ a bunch of people." That would be noble, but it doesn't usually work that way. If these same workers were Verizon shareholders, but worked somewhere else, they would want the money over saving the jobs. That is how the economy works. People are selfish and do what is in their best interest.

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I doubt any of these employees would work for free if Verizon couldn't afford to pay them. So why do they expect Verizon to keep jobs just because they have good profits? Businesses need to do what is best for shareholders, and customers. Mistreating and manipulating employees does not usually fulfill those two goals, but neither does overpaying your employees. It would be nice if WalMart paid people $30 an hour, but if that means it costs me more money each time I shop there, then I don't support it.

Many people think companies shouldn't worry about profits, and that they should take fewer profits in order to treat employees better, but I disagree. Profits determine how capital is deployed by providing the best returns to those who use it most productively. Efficient capital allocation improves the standard of living of us all (in an absolute sense, but not necessarily relative to each other).

So I am not defending Verizon, since I don't know the situation in detail. But, I do get tired of hearing people complain about the big company firing the little guys, when many times (but no always) it is the right thing to do, and actually benefits us all in the long-run.