There is a moral and ethical decay in many media boardrooms and c-suites today. Its most obvious manifestation is the massive wave of layoffs across the industry in recent months.

Disney, WB Discovery, NBC Universal, Meta, Twitter, Netflix, Amazon – virtually every company across the ecosystem is letting people go. And lots of them. In large part, the people losing their jobs are the ones doing the work in these companies. And they do so with very little security from their employer. They are work for hire employees, meaning they can be let go at any time and for any reason.

The stories are all over LinkedIn.  People who have worked 5, 10, 15 years for XYZ company get called into a meeting on a random Tuesday and twenty minutes later they’re out.  It’s over, just like that. Some companies are more generous than others, but in most cases the best severance an employee not under contract can hope for when they get laid off is 2 weeks for every year of employment.

Juxtapose the situation of the average employee with that of the CEO.  Almost all of them are older white men operating under the security of employment agreements with guaranteed lucrative comp packages that provide a lifetime of financial security not only for themselves, but for their great grandchildren.  CEOs have tough jobs and deserve to be well compensated.  I have no problem with someone working hard, rising through the ranks, and being richly rewarded for their efforts. 

But some of these comp packages are so exponentially greater than what the average employee makes that they border on the absurd.  It’s difficult to listen to a CEO making nine figures talk about the need to cut personnel costs without acknowledging the ridiculous irony of the situation.  And, of course, their contracts include generous severance packages so the CEO can operate without fear of the consequences of poor performance.

Let me be clear, laying off employees is itself not inherently immoral or unethical.  Neither is paying CEOs a lot of money.  Moreover, I take it for granted that headcount reductions are agonizing decisions for these leaders.  They are not unfeeling sociopaths who take pleasure in cutting headcount. 

The fact is companies can’t thrive in a capitalist system without the ability to freely reallocate resources in pursuit of new opportunities or in response to financial headwinds.  As employees it’s the bargain we make when we take the job.  There are no guarantees.  No risk, no reward is a core tenet of the system.

By rewarding the risk takers, capitalism has done enormous good for the world.  The right of individuals and institutions to pursue their interests to better themselves and invest their capital as they see fit has lifted the fortunes of billions of people around the world.  Yet no system is perfect, and never will be, for the simple reason that people aren’t perfect and never will be.  There are no utopias on this Earth.

In the case of capitalism, the ever-present danger is that a select few find a way to game the system to eliminate the risk for themselves at the expense of others.  This creates a “moral hazard” where those at the top of the pyramid are immune from the consequences of failure.  That is where we are in media today.

A perfect example is the financial reckoning the industry is facing with the migration of audiences to streaming.  For years CEOs were praised and rewarded for making massive investments of capital to grow from scratch direct to consumer streaming offerings.  Yet recently the folly of a single minded, almost slavish, focus on subscriber growth at the expense of all else has become apparent on media company balance sheets.  It is the shift towards more responsible expense management, implemented in many cases by the same CEOs who authorized the original misguided, massive investments, that are prompting so many layoffs. 

The moral hazard is the consequences of these failures are not being borne by the people who made them.  They continue to collect their Solomon-sized rewards, even if they no longer have their jobs.  Just Google the severance package of your favorite ousted media CEO.  Meanwhile tens of thousands of people are left holding the bag, wondering how they will provide for themselves and their families when their meager severance runs out.

I do not hold out much hope that boards will address the excesses of CEO compensation.  However, if boards are going to immunize CEOs against the consequences of failure, they should tip the scales a bit in favor of their employees by providing more security in the event their job is eliminated.  There is a simple way to do this:  guarantee every employee, once they have achieved a relatively short period of tenure, maybe 6 months, a year tops, one year severance if they are laid off. 

I realize CEOs, boards and investors will protest mightily. It’s too generous. It will raise hiring costs and slow down job creation. It will make it harder for companies to find savings or quickly reallocate budget. Yea, I get all that. Some of these arguments have more merit than others but it’s tough not to discount them considering the sources. The people who would raise these complaints are compromised by the very moral hazard I mentioned previously.

Putting that aside, I believe over time CEOs and boards will come to see the benefits of mandatory one year severance. If employees had the assurance that their companies were on the hook for more than a paltry two weeks per year, they will have less to fear and therefore be more productive and loyal. Diminishing the sting of layoffs will also help those employees who survive a wave of cuts. As anyone whose worked for a company that is downsizing, as bad as layoffs are for the people who get let go, they cause huge morale and productivity challenges for those who retain their jobs. They spend less time working and more time worrying that they will be next.

CEOs should not allow press adulation or the superficial praise they hear from employees about their leadership to delude them into thinking their cultures are fine.  Headlines are ephemeral and internal ass kissing of the CEO is practically an epidemic in corporate cultures.  The truth is employee cynicism in media is rampant and pervasive due in large part to the inequitable distribution of risk.  It has become toxic in many places.  So, if you believe the old business adage “culture eats strategy for lunch,” than the rationale for improving the culture by providing meaningful protection for employees is overwhelming.

In the end this issue gets to the heart of the role of companies in our society. What’s most important – generating free cash flow, rewarding investors, delighting consumers, creating jobs, delivering products and services that serve the greater good? It’s the topic for another blog but I think we need to recognize the limits of free market institutions. Disney, Netflix, or Meta can’t save the world. Nor should they try. But I do believe that these companies can make the world a better place by acknowledging their obligation to do more to provide reasonable security for all their employees, not just those at the top. Guaranteed one year severance would be a big step in the right direction.