Military Contractor Raytheon Cuts 15,000 Jobs—CEO Still Earns Millions
Raytheon Technologies, a large U.S. defense contractor, announced plans to lay off over 15,000 people. The cuts will affect the workers at the company’s jet engine-builder, Pratt & Whitney, and its aviation and military equipment manufacturer, Collins Aerospace. A number of Raytheon’s business divisions have been adversely impacted by the Covid-19 pandemic.
At a Morgan Stanley investment conference, Raytheon CEO Greg Hayes said, “I would tell you the commercial aero team has jumped on this crisis, and they're driving about $2 billion in cost reduction and $4 billion in cash conservation actions this year. These cost actions include the elimination of more than 15,000 positions across our commercial aerospace and corporate organizations. Those headcount reductions are nearly double the previous estimate of around 8,500 that we gave you back in July. And we're not done yet looking for further ways to reduce structural costs in all of our businesses.”
According to Bloomberg, “The deeper reduction in payroll—most of which is expected this year —highlights the continued pain that the drop in global airline traffic has inflicted on suppliers as carriers ground jets, retire planes early and delay nonessential fleet maintenance.”
The Massachusetts-based aerospace and defense company has about 195,000 employees. The company is involved with a wide array of products and services, including the design, manufacturing and servicing of engines and auxiliary power systems for commercial, military and business aircrafts. It also develops advanced sensors, training and cyber and software solutions. Its Missiles & Defense unit provides solutions to detect, track and engage threats.
Back in late July, due to the adverse impact of COVID-19 on the aviation industry, Raytheon planned to cut about 8,000 jobs in its commercial aviation business. Hayes told employees about the impending potential furloughs and salary cuts by saying, “While many of these measures have been difficult, it is the right thing to do for the business.”
Only weeks later, stock awards were issued to Hayes and other managers. They collectively received about $100 million, according to calculations by Bloomberg News. Hayes also made $19,467,099 in total compensation in 2019.
To be fair, Hayes’ portion of the $100 million wasn’t broken down, but the New York Times estimated it at about $12.5 million. It's exceptionally challenging for a CEO to navigate large corporate acquisitions and integrations, run complex organizations, fend off competitors and innovate. There’s always out-of-the-blue potential disasters that need to be delicately addressed to avoid public relations nightmares. For Hayes, this was effectively fending off a very public attack from then-Republican nominee Donald Trump, who shamed Hayesfor the company’s decision to relocate a plant and jobs to Mexico from the United States.
One of the reasons for America’s success is capitalism. We reward people who offer value. Professional athletes, actors and musicians earn fortunes—sometimes billions of dollars. With publicly traded companies, it's a little different, as there are shareholders, workers and other stakeholders involved.
It seems odd that when corporations need to reduce expenses, the go-to move for cost-cutting is the slashing of jobs of rank-and-file workers. CEOs and top executive management seem immune to this. They’re not terminated nor worry about having their lush compensation cut or bonuses clawed back.
This isn't just about Raytheon or Hayes. There’s been a long list of iconic American companies, including retailer J.C. Penneyand car rental giant Hertz, that have filed for bankruptcy protection, laid off workers and paid out millions to their CEOs and top echelon management.
We’ve allowed a two-tier system in which the CEOs and upper management get a pass when it's time to execute job cuts and salary reductions, while the average worker loses their job.
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Originally published: https://www.forbes.com