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Should Big Media and Other Elite Firms Look Beyond Profit During Lockdown?

If there is a sacking spree, as seen in ToI, unemployment will further shoot up and depress demand. The economy will struggle to return to normal thereafter.
Should Big Media and Other Elite Firms Look Beyond Profit During Lockdown?

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When journalist Nona Walia claimed on April 13, that she and two of her colleagues had been sacked from The Times of India, social media users were stunned for a variety of reasons. For one, the giant media conglomerate had broken the social consensus that every Indian, particularly the wealthy, should shoulder the economic burden of the national lockdown, imposed to check the spread of COVID-19, the illness caused by the novel coronavirus.

For the other, the ToI seemed to have disregarded Prime Minister Narendra Modi’s repeated requests and the Home Ministry’s March 29 notification asking all employers whether in “the industry or in the shops and establishments” to pay wages to their workers “without any deduction”. 

Joining the ToI in handing out pink slips was News Nation, a Hindi language news channel, which packed off its entire English digital team of 15 journalists, and the Quint news website, which has reportedly asked 45 employees to go on leave without pay. 

Yet the ToI’s decision shocked most because it is published by Bennett Coleman and Company Ltd, or BCCL, which has been regularly posting profits over the years. For instance, BCCL booked a profit of Rs 484.27 crore in 2018-19, down from Rs 681.37 crore in 2017-18. Its total expenditure on employees was Rs 2,562.93 crore in 2018-19 and Rs 2,390.52 crore in 2017-18.

With such an enormous salary bill, it seems a case of sheer heartlessness that the ToI should have sacked Walia and two of her colleagues. They worked in one of BCCL’s print publications, which, taken together, raked in revenues of Rs 6,259.89 crore by March 31, 2019, a slide from Rs 6,415.43 crore in the previous year. By contrast, BCCL’s TV and internet ventures are not really augmenting its profits. And to think, Walia was sacked after having worked for the group for 24 years, that too amidst the near economic paralysis caused by the lockdown!

Profits do not necessarily demonstrate a company’s capacity to pay their employees at a time when its revenues plummet, which has been the case with many entities during the lockdown. “What matters then is the cash reserve a company has. It is possible it could have invested profits and cannot dispose of it immediately to raise money,” said Pronab Sen, India’s first Chief Statistician and country director for the India Programme of the International Growth Centre.

BCCL, however, has an enormous cash reserve—its balance sheet of 2018-09 showed it had cash and cash equivalent of Rs 1,260.09 crore, up from Rs 977.25 in 2017-18. Its cash flows from operations is positive, as is the net flow. And debt is a very small proportion of its finances. Sen said, “It may be legitimate for the ToI to sack its employees, but it is certainly amoral of it to have done so.”

Since BCCL did not respond to our queries, it is hard to tell whether it thought of other methods to save jobs—for instance, ask employees to take a salary cut. M Vijayabaskar, professor, Madras Institute of Development Studies, said: “The average salaries in the media are far more than the Indian average. The first thing the ToI should have done is to offer salary cuts to employees. It was unjustified to fire employees.”

Vijayabaskar says that profitability cannot be the sole criterion to decide on lay-offs. “Every person has a right to life and dignity. Salary cuts in media houses can ensure a decent standard of living for all,” he said. This is precisely the route the Indian Express has taken, reducing salaries by varying percentages across different pay scales.

Though it may seem heartless of ToI to sack employees, yet it is the route many corporates are expected to take before and after the lockdown. Should they sack employees to ensure their profit margins do not dip below a certain level? Or should these companies show a moral commitment to serve the common good in these days of economic paralysis brought about by the coronavirus-induced lockdown? 

There were 10,327 companies which, according to the Union government’s latest budget, earned a pre-tax profit between Rs 10 and Rs 500 crore. Another 424 companies’ pre-tax profit was upward of Rs 500 crore. (Based on a sample size of 7,90,537 companies who filed tax returns in 2018-19). Could these companies, including BCCL, play a role in saving jobs and making life secure other than issuing instructions on how to make masks, as the ToI has been doing? The answer, once again, depends on whether they have the cash to pay salaries when their revenues cannot be as robust as they were earlier. 

Mahesh Vyas, managing director and chief executive officer of the Centre for Monitoring Indian Economy Pvt Ltd (CMIE), said Indian companies, on average, have enough cash to meet their expenses for 24-25 days even without earning a penny. Wages to employees constitute around 9.3% of the operating cost. But companies have neither been buying raw material nor have they been spending on overheads such as energy. This means their cash reserves would not have dwindled substantially during the lockdown.

“My back-of-the-envelope calculation shows that non-finance companies, on average, can pay wages for another three months,” Vyas said, adding, “That said, it should be left to corporates to decide the extent to which they want to save jobs. It should not be done through a government diktat.

Vyas, however, said the economic crisis caused by COVID-19 is just the moment for the government to pass a law spelling out the severance package that companies must pay to those whom they lay off. This measure will calm, to some extent, Indian society gripped by anxiety over livelihood.

Six months before COVID-19 emerged to challenge the moral frame of capitalism, which considers maximisation of profit as the principal driver of human enterprise, Washington Roundtable, a lobby group of nearly 200 CEOs, issued a statement placing stakeholders, including employees, as equals to their shareholders. 

In its editorial on the statement, The Guardian wrote, “Since hypocrisy is very often the tribute that vice pays to virtue, they show that the fashion in virtue is changing and that there is growing recognition that the pursuit of profit without reference to any other considerations is unethical.” 

From this perspective, the ToI’s decision to sack its employees seems unethical, more so as COVID-19 ravages the globe, including India. 

Sacking employees to shore up declining profits is also bereft of what is called “enlightened self-interest.” A sacking spree will make unemployment shoot up and depress demand, making it extremely difficult for the economy, even once the ignition key is turned on, to switch to cruising in high gear. 

Indeed, BCCL and other elite companies should listen to the advice of Stephen Squeri, chief executive of American Express, who is among the signatories to the Washington Roundtable declaration. With the unemployed seeking the American’s state assistance crossing 6.5 million, Squeri said, “Even during the financial crisis [beginning 2008-2009], in the worst year we have had, we made $2.2 billion. How bad would it have been if we made $1.8 and I had more of my sales organisation to get out and hit the ground running even faster [when business recovered.]”

COVID-19 is also a lesson for all those who believe the market’s wisdom can be relied upon for economic resilience and well-being. State after state has stepped forward to offer packages to stave off an economic collapse. For instance, the French government has allowed companies to send their employees on “technical leave”, during which period the government will pay a large part of their salaries.

Recognising the financial burden of such heavy payoffs, French labour minister Muriel Penicaud approached France’s top 40 companies to desist from taking advantage of the “temporary unemployment scheme.” Most of them have reportedly agreed. Louis Vuitton, one fine weekend, decided to divert its stock of alcohol, which is used for making perfumes, to manufacture hand sanitiser, which it handed over to the government in bottles, after removing their labels.

In India’s context, it will be foolish for us to expect a small manufacturing unit in, say, Delhi’s Okhla industrial area, to take the lead in protecting the economy from the ravages of coronavirus. The lead has to come from cash-rich companies, such as BCCL.

Equally, the Indian government will have to nudge the corporate sector into acting for the common good—just like the French or other governments. For instance, Singapore has evolved a scheme for encouraging employers to retain workers. Its government will co-fund the first $4,600 of each employee’s wages for nine months. In April, it will provide up to 75% of the wages of all employees in all sectors. For the remaining eight months of this calendar year, the break will be for 75% of the wages in the aviation, tourism and accommodation sectors; 50% in the food services sector; and 25% for all the rest. 

India is neither France nor Singapore, and is saddled with the formidable task of feeding the teeming millions because of the ill-advised decision to have an abrupt nationwide lockdown. But the Indian state can certainly evolve incentives for entities willing to save jobs and, therefore, the economy, along with disincentives for those who sack employees say, in the next one year, although they can afford to keep them on their payroll. 

This is precisely what Vijayabaskar said: “The Indian state’s abdication of its responsibilities has deepened since the era of liberalisation. It has increasingly bought into the view that the market guides growth best. The state must now ensure that employers retain workers through a spate of incentives and disincentives.”

Indeed, not to do so will mean the Indian state has turned amoral as never before, and it will be guilty of displaying insensitivity, as ToI and some others have done by sacking employees.

Pragya Singh works with NewsClick. Ajaz Ashraf is an independent journalist. The views are personal. 

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