Leno, Layoffs, and Lessons in Leadership

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The term "layoffs" still hits the headlines far too often to indicate an economy that's anywhere close to healthy. The current 8.1% unemployment rate is a reduction from recent levels, but that's still a dreadfully high number. Worse, the improvement reflects jobless Americans who have simply given up their searches for work.

TV star Jay Leno, host of NBC's The Tonight Show, recently made a major financial sacrifice to try to reduce the number of colleagues who would be laid off due to budget cuts.

We shareholders should expect similar behavior from our well-paid, "superstar" CEOs.

The American job drain
These issues are all the more urgent and significant because headlines indicate that the job drain continues in America.

Hewlett-Packard (NYSE: HPQ  ) recently increased its planned number of job cuts by 2,000 to a total of 29,000 over the next two years. Bankrupt Eastman Kodak announced 1,000 more reductions recently, although granted, it slashed some jobs on its management team and ousted its chief financial officer. Google's (Nasdaq: GOOG  ) Motorola Mobility acquisition will result in 4,000 fewer jobs at that mobile unit, although two-thirds of the lost jobs will be employees overseas.

Whether the layoffs in the above examples are signs of management incompetence or market mandates is an argument for another day. The point is that many huge American companies continue to cut jobs when our economy desperately needs an increase in gainfully employed Americans.

What does talk show host Jay Leno have to do with all this? He recently volunteered to take a 50% pay cut, recently confirmed by network NBC, now part of cable giant Comcast (Nasdaq: CMCSA  ) . According to Leno's representatives, he chose the severe salary cut to help save some other Tonight Show staffers' positions.  

The power of sharing
Leno's role at The Tonight Show may not be the same as that of a corporate CEO, but he has an extremely high profile and a very high paycheck to match. The fact that he chose to take a very significant salary hit in order to reduce costs and save jobs is what more shareholders should expect from chief executive officers during tough times.

Sadly enough, such sacrifice happens so rarely in corporate America that it can be difficult to summon more than a handful of examples over years' time.

Here's one recent example of a CEO making a choice about his salary: Sprint-Nextel's (NYSE: S  ) CEO Dan Hesse volunteered to have $3.25 million shaved from his pay because shareholders complained that his salary calculations conveniently left out high costs associated with the company's deal to sell Apple's iPhone. Although his choice wasn't directly geared toward saving jobs, it still reflected a chief executive who's willing to voluntarily try to do the right thing and boost morale with the gesture.

Last summer, my colleague Brian Richards described a company that's been designed for true team spirit during profitable times and painful ones. For more than 60 years, Lincoln Electric (Nasdaq: LECO  ) has never conducted mass layoffs due to economic problems, and salary cut sacrifices have been shared by the CEO and everyone else.

Give or take
In corporate America, not only do most chief executive officers shrug off any notion that they could (gasp) choose lower paychecks to help mitigate mass layoffs at their companies, but many aren't even eager to see their paychecks tied to long-term performance measures, either.

Meanwhile, when corporate boards actually do shake things up and cut CEOs' paychecks due to performance, the individuals are usually still taking home millions anyway. In other words, CEOs' salaries tend to be shockingly resilient in the grand scheme of things.

Many Americans may not view Leno's gesture as all that impressive because even after his voluntary pay cut, he'll still take home $15 million. Still, Leno was previously entitled to twice that amount and chose to leave millions on the table so that colleagues' job cuts wouldn't have to be as deep.

Do people with big power and big paychecks have no other conceivable choice than to take? Giving up something for the greater good may be more about self-interest and economic survival than many investors might think.

As the old saying goes, what goes around comes around, and what's been going around recently is an economy that's going nowhere fast. Eventually many businesses -- and investments -- will suffer. In light of the poor economy, a little more shared sacrifice to cut costs when necessary and save jobs would probably go a long way to a brighter economic outlook for all of us.

Sprint's CEO made a smart move, but when it comes to smartphones, Apple still has the upper hand. Learn all you need to know about investing in the iPhone giant in our premium report on Apple, which comes with a full year of detailed updates and guidance on the company.

Check back at for more of Alyce Lomax's columns on environmental, social, and governance issues.   

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google, as well as creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 12, 2012, at 4:11 PM, TheCommonTulip wrote:

    Well done, well said. How often do lay-offs actually help a company in the long term? The stock may jump but (in my opinion) it's usually a red flag that the company can't grow earnings the right way.

  • Report this Comment On September 12, 2012, at 4:19 PM, TMFLomax wrote:

    mrrightside, I agree with you completely. It's often a major mistake for long-term business health.

    thanks for reading!



  • Report this Comment On September 12, 2012, at 11:49 PM, JULPAC wrote:

    This is a great article - it clearly illustrates that true charitable acts begin w/ the self.

  • Report this Comment On September 13, 2012, at 7:19 PM, poach wrote:

    Leno takes it on the chin!

  • Report this Comment On September 15, 2012, at 8:48 PM, TMFDarwood11 wrote:

    My spouse, a public system teacher, discussed with HR the possibility of a wage/benefit freeze in 2010. This would have kept more people employed. Such a freeze would affect both "workers" and "management."

    The HR person looked like her as a deer caught in the headlights.

    BTW, one of my favorite home-made T-shirt and bumper slogans for the public school system is "We don't manage, we administer."

    Her ongoing conversation over the past two years has resulted in a lot of complaints by fellow employees. But no one, and I mean NO ONE is willing to give up anything.

    My spouse has decided to seek employment elsewhere, My suggestion to her is very simple, if you really want to get out of the system, you'll probably have to leave the country.

    A good example of the problem is what is the current Chicago Teacher's Union strike.

    It isn't just the fat cat CEO's.

    As for Leno, he is a victim of "change" and falling viewership. On a really good night, "The Tonight Show" may get 1.313 million viewers, It had an average of 3.87 million viewers. Using simple arithmetic, Leno should have taken a larger pay cut.

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