Worries about recession in the tech sector: After massive job cuts, Google CEO Pichai wants to cut his own salary and manager bonuses

shares in this article

• Tech giants hit by recession concerns
• Numerous tech companies are quitting downsizing at
• In addition to job cuts, Google CEO reduces his own remuneration

Numerous tech giants have announced extensive job cuts in recent weeks. For example, Facebook parent Meta Platforms, Tesla, Amazon, IBM, Spotify, Microsoft and Google parent Alphabet, to name just a few. The background to these austerity measures are fears of a recession that have been rampant in the market for some time. The current market environment is still characterized by high inflation and, in connection with this, rising key interest rates. Added to this is the sharp increase in raw material and energy prices, which are fueling inflation once again. The rising interest rates are particularly burdening those companies that have a high need for external financing, including tech groups. In addition, the market fears that the higher financing costs could lead to a stalling of the economy, which is why the fear of a downturn is omnipresent.

Changed economic environment leads to job cuts

Things looked different at the time of the corona pandemic, when the monetary watchdogs monetary policy designed to be ultra-loose in order to be able to cushion negative economic effects in the best possible way. On the other hand, the demand increased in the course of extensive lockdown measures digitalization and tech solutions that work from home have skyrocketed – a boon to the tech giants who geared their businesses to ensure the upswing would continue. This is taking revenge now that the economic climate has turned – with the result that tens of thousands of people are losing their jobs.

Google’s mother Alphabet is cutting 12,000 jobs

The Google mother Alphabet announced a reduction of around 12,000 jobs, which corresponds to around six percent of the entire workforce. As can be seen from an e-mail from Google boss Sundar Pichai to his employees, the CEO is struggling with the downsizing, but takes “full responsibility for the decisions that have led us here,” as quoted by the German Press Agency. During the corona pandemic, for example, the workforce was massively expanded, but the economic reality is different now. Now the number of employees must be adjusted to the central priorities of the company. Google’s focus has been on the field of artificial intelligence for several years.

CEO salaries and manager bonuses will also be reduced

But the austerity measures don’t just include job cuts. According to a report by Business Insider, the Google CEO announced at a recent employee event that Alphabet’s top executives could also expect their bonuses to be cut this year. This applies to all positions above senior vice president level, as the remuneration of these managers is linked to the performance of the company. However, nothing has been said about how much less salary Sundar Pichai himself would receive.

Apple CEO Tim Cook also with less salary

Pichai is not the first corporate leader to take this step. Tech giant Apple recently announced that CEO Tim Cook should earn significantly less in the current financial year – even though the smartphone manufacturer is one of the few tech giants who have not yet announced any planned job cuts. As can be seen from documents relating to the annual general meeting of the iGroup, the allocation of shares to Cook should depend more on Apple’s business development, but the basic salary of three million US dollars will not be touched. For comparison: In the completed 2022 fiscal year, the Apple boss earned $ 99.4 million – largely thanks to the share packages.

TCI hedge fund thinks Google job cuts are insufficient

But Alphabet’s pay cuts and job cuts don’t go far enough for British hedge fund The Children’s Investment Fund (TCI), the fund’s management wrote in a letter to Pichai after it announced 12,000 job cuts. TCI founder and managing partner Christopher Hohn called this “a step in the right direction”, although it was necessary to further reduce the workforce. Specifically, he calls for a reduction in the number of employees to around 150,000 people, which would correspond to job cuts of 20 percent. In addition, Alphabet should address “excessive employee compensation”, after all, “the median wealth at Alphabet in 2021 would have been almost $300,000, the average wealth even higher”.

The TCI hedge fund has invested in Alphabet since 2017, according to a management letter to Google CEO Pichai sent back in November 2022. At the time, the stake in the Google parent would have been worth more than six billion US dollars. The letter at the time was already about the escalating costs of the tech group and the demand to drastically reduce them.

Editorial office finanzen.net

Image sources: Justin Sullivan/Getty Images, Naypong / Shutterstock.com