During this COVID-19 crisis more than a few moral questions are finally out in the open. Here’s one that sparked many a heated debate here in the Netherlands.
Before we go into the question, a quick background.
To help keep companies afloat during this economic crisis, which according to many publications, is only just beginning, the Dutch government has instituted the so-called temporary emergency measure NOW (a Dutch acronym for Temporary Emergency Measure Bridging for Employment). The principle of NOW is brutally simple: entrepreneurs can be reimbursed up to 90% of their wage costs if they expect to lose at least 20% turnover over 3 months due to the corona crisis. ‘Pay first, ask questions later’ is their motto during this crisis. A rather radical departure from the usual red-tape.
So far, some 92,000 entrepreneurs have file a request for NOW, according to various newspapers. 92,000 companies, big and small have requested this emergency support from the government (/the Dutch taxpayer). And there is, in principle, absolutely nothing wrong with that.
When things get murky…
I deliberately said in principle… Because among those 92,000 entrepreneurs is Booking.com ceo Glenn Fogel, who saw 85% of bookings of his world’s leading travel site just wiped out. According to a leading newspaper: ‘In over ten years, Booking.com has expanded from 1,000 to 18,000 employees, 5,500 of whom work in the Netherlands. The exact terms of the state aid to Booking.com are not known. The average income at Booking Holdings is almost 47 thousand euros per year. If the Netherlands pays up to 90 percent of the wages of the 5,500 Booking.com employees in our country via the NOW scheme for three months, the damage could amount to tens of millions of euros.’ In this context it might be noteworthy that the average income in the Netherlands is €36,500 per year. So the average booking.com employee is a rather well paid one.
In (the unlikely) case you’ve never heard of Booking.com, here’s an overview. The company is in debt. Booking Holdings, the US-based holding company, has against the US$6.3 billion in cash (!) a debt of US$7.6 billion. The company made €3,5 billion (US$3,500,000,000) profit last year, which it spent largely on a stock buy-back scheme. There are many that accuse the company of buying back shares to prop up the value of its shares, which would only benefit existing shareholders and employees whose bonuses are for a large extent a certain number of shares.
As stated, the Corona pandemic caused bookings at the company to drop by 85%. Disastrous by anyone’s standards. Depending on how long this crisis will last before things go ‘back’ to a (new) normal, and how that new normal will look for Booking.com, measures will have to be taken.
Fogel has already made a first atoning sacrifice by handing in a whopping 20% his salary. At the same time, the Works Council noted, Fogel’s salary is only a fraction of his fee: in 2018, his fixed wages were $ 750,000, but thanks to bonuses and shares, he was able to add a total of $ 20.5 million to his bank account that year. So this atonement was ‘lead round scrap iron’ as we say here.
Stop the (now much less) expensive share buy back scheme, which cost Booking US$14 billion in the last two years, is another demand from the Works Council in order to minimize the number of forced lay-offs among their 5,500 strong workforce.
The latest measure is applying for the NOW-scheme…
A moral question…
The question basically is to what extent this is the classic trick of business in an economic crisis: privatize profits, socialize losses. Let the (Dutch) taxpayer pay to prevent lay-offs.
In the previous crisis, banks did this incredibly well. Billions of profits disappeared into the pockets of employees and shareholders, the losses came to taxpayers worldwide.
The other way
Now, let me the first to paraphrase the ceo of Shake Shack who stated on CNN that ‘in this pandemic no company is unsinkable’ and that every company has the obligation to care for their people. Exactly why Shake Shack initially requested the emergency loan. The above linked article opens with:
‘Shake Shack (SHAK) is returning a $10 million loan it received from the US government under an emergency program that was touted as a way to help small businesses pay workers and keep their operations running during the coronavirus crisis.The burger chain was awarded the loan as part of the Paycheck Protection Program (PPP). The $349 billion stimulus package, overseen by the Small Business Administration (SBA), ran out of funding last week. Over the last few days, there has been a growing backlash over the distribution of the funds. Several media outlets have revealed how large chunks of the package were taken up by chain restaurants, hoteliers and publicly traded corporations, rather than small, local businesses
Shake Shack CEO Randy Garutti and chairman Danny Meyer revealed their decision to give back the funding in an open letter Monday, saying that the NYSE-listed company no longer needs the money because they are “fortunate to now have access to capital that others do not.” The company said in a filing Friday that it expects to be able to raise up to $75 million from investors by selling shares.’
Now, there’s a novel way, selling shares to get the cash-infusion the company needs to pay its employees.
Booking.com might well take a look at this and think again what they will do with the $4 billion in loans they claim to have secured. Now is the time for some ‘caring capitalism’ instead of the ‘savage capitalism’ where shareholder value has been King.