As tech giants and startups around the world have laid off workers to appease Wall Street and focus on profitability, Indian billionaire Sridhar Vembu believes a few companies are implementing job cuts out of “naked greed.”
Those companies, Vembu says, should not expect loyalty from their employees – a statement he made as an apparent jab at Freshworks, his company Zoho’s competitor.
“A company that has $1 billion in cash, which is about 1.5 times annual revenue, and is actually still growing at a decent 20% and making a cash profit, laying off 12 to 13% of its workforce, may don’t expect any loyalty from his employees ever. And to make matters worse, it can afford $400 million in share buybacks,” Vembu wrote in a post on microblogging platform X, without naming a specific company.
“I can understand the unfortunate reality of layoffs when a business is struggling or declining and making a loss. This is not that situation, this is pure greed, nothing less,” he added.
A company that has $1 billion in cash, which is about 1.5 times annual revenue, and is actually still growing at a decent 20% and making a cash profit while laying off 12 to 13% of its workforce, should not expect some loyalty from its employees. employees ever. And to make matters worse,…
— Sridhar Vembu (@svembu) November 7, 2024
The Zoho founder’s comments came a day after Freshworks reported results for the July to September 2024 quarter, in which total revenue was $186.6 million, up 22% compared to total revenue of $153.6 million in same quarter of 2023, and 22% when adjusted. for constant currency. The company also increased full-year 2024 revenue, non-GAAP revenue from operations and non-GAAP net earnings per share guidance.
However, the Nasdaq-listed software-as-a-service (SaaS) company announced it will reduce its workforce by 13%, impacting about 660 employees globally, as part of its efforts to streamline operations. The company currently employs more than 5,000 employees. The layoffs will impact Freshworks staff in the US, India and other locations.
Freshworks also announced that its board of directors has approved a $400 million share buyback program, but did not provide details on a timeline for this exercise.
Following these developments, without mentioning Freshworks (even though the details of the post appear to match those in the Freshworks results), Chennai-based Vembu posed a critical question to the company’s leadership.
“Don’t you have the vision and imagination to invest $400 million in another industry where you can use the people you hired but don’t want anymore? Are there no such possibilities in technology? Do you have so little curiosity, vision and imagination? Do you have so little empathy?” he wrote
The Zoho founder claimed that this behavior has unfortunately become all too common in the American business world and is being imported into India. It has only led to widespread cynicism among employees in the US and is also being imported here.
Vembu claimed that this is the reason he has decided for his company to remain private. “We put our customers and employees first. Shareholders should come last.”
When one of the there simply aren’t any employees for it. At some point, the company will be able to redeploy the excess people they hired.
“Second, if you have a lot of money (that’s the case I mentioned), a good way to engage people would be to use our imagination to start new products and services. Layoffs under the circumstances I mentioned completely destroy morale,” he replied.
Replying to another user, he said that this wasn’t the norm in the US at all 50 years ago. American companies became world beaters by taking care of their employees. However, this private equity and Wall Street-led “shareholder first” world isn’t working and won’t even work out well for shareholders, he said.
Vembu also emphasized that the Friedman doctrine – “a corporation’s only duty is to maximize profits and shareholder value” – does not work. It results in the ‘use and throw’ model for employees. “People don’t like to be treated like that.”
“Then why has it apparently worked in the US? “Topsoil erosion and import of new topsoil” – use and discard your people, then import new people to replace them. We have just seen the extreme political divisions this model creates.”