“Congratulations on Your Layoff, the Share Price Is Up!”
Why do companies fire thousands when profits are strong? We break down the shareholder logic, legal myths, and Wall Street incentives behind modern layoffs.
Somewhere between the third espresso and the eleventh slide deck, a C-suite decision emerges: lay off 6% of staff. Not because the business is failing (it isn’t), not because you’re not doing your job (you were, right?), but because… well… math. Strategic math. The kind that gets Wall Street hot under the collar.
Layoffs, we’re told, are necessary. Fire a few thousand employees and your cost base slims down just in time to beat quarterly guidance by two cents per share. The Street loves it. The CFO grins. The CEO calls it “operational resilience.”
So why does this happen? Well, there’s no law forcing this. The oft-cited “fiduciary duty to maximize shareholder value” isn’t enshrined in stone. Courts mostly let directors do what they want, as long as they don’t break stuff or rob the company blind. But still, the myth persists, powering decisions that cut jobs to signal discipline. It’s theatre with real consequences. And the audience? Mostly analysts. Not employees.
Thou Shalt Cut Heads to Please the Gods of NASDAQ
Ask a group of freshly-minted MBAs or crack open a Wall Street Journal editorial, and you’ll hear the gospel without fail: the sole purpose of a company is to maximize shareholder value. It’s recited with such confidence you’d think it was carved on tablets next to GAAP. But it’s not actually a legal obligation law. There is no line in Delaware corporate law that says “maximize the share price, or perish.”
In reality, U.S. corporate law gives directors a shockingly wide runway. As long as they act in good faith and with some semblance of reason, courts will stay out of the way. It’s called the Business Judgment Rule. A board could fire 10,000 people to fluff margins and spark a 7% pop on Bloomberg. But they could also decide to keep people through a downturn, invest in long-term R&D, or even stop stock buybacks to fund reskilling. All of these decisions are legally defensible. The difference lies in which one gets the stock price moving, and which one gets the CEO fired.
So while the law doesn’t require blood sacrifices to the NASDAQ gods, the market does seem to appreciate them. And so does executive compensation. Funny how that works.
Public Companies: Where Layoffs Are a Feature, Not a Bug
When a company goes public, it raises capital and enrolls in a new religion: quarterly deliverance.
Earnings calls become ritualistic self-flagellations,
Executives beg for forgiveness for last quarter’s two-basis-point margin miss, and
Sell-side analysts decide whether they still believe in the business based on how often the CFO uses the word “efficiency.”
In this new reality, you are no longer rewarded just for running a good business. You’re rewarded for hitting numbers that look good on the right screens at the right time. And layoffs, conveniently, hit those screens in just the right way. Not because they’re always necessary, but because they create “narrative clarity.” The market loves a good story, especially one with cost cuts, operational discipline, and a precise dollar value attached to “streamlining.”
So what do you do?
You time your layoff announcement for maximum optics.
You fire thousands.
You give it a polished name like “structural efficiency realignment.”
You project the savings, estimate the restructuring charge, and release it all neatly bundled on earnings day, so that it’s easy to digest.
In the U.S., this is seen as strategic. In much of the world, it’s seen as premature, sometimes even unethical.
European firms must consult works councils, negotiate with unions, and endure real questions from real humans before pulling the plug.
In Japan or South Korea, you might need to prove you tried literally everything else first.
But in the U.S., the incentives are structured for speed. Layoffs are more about proving to the Street that you’re “taking action.” And once one company does it? Others follow. Like clockwork. Or like a nervous flock of CEOs who all read the same Goldman Sachs memo.
The Real Magic: How Firing You Makes the Stock Go Up
This is capitalism’s sleight of hand. A company announces 15,000 layoffs and immediately, analysts start calculating savings gain. If the firm claims $2 billion in annual cost reductions, that’s music to a market that values recurring savings. Slap on a 12x earnings multiple and suddenly, the cuts are “worth” $24 billion in enterprise value. The markets react before the pink slips are printed.
That’s the real trick. Layoffs are capital market messages. Investors hear “we’re tightening discipline” and see it as proof the firm hasn’t lost control of its margin religion. If those savings are bundled with steady guidance or a surprise beat, the message is clear: “We can do more with less. Probably without you.”
And this is why the stock goes up. Not because cutting people is inherently good, but because cutting people without collapsing performance looks like strong management. A confident board. A capable CEO. Especially if that CEO is new and needs to make a mark with a bold, bloodless move that Wall Street respects.
White-collar layoffs are even more appealing. They come with fewer supply chain nightmares and less reputational blowback than, say, a factory shutdown. And when timed alongside earnings, new strategy decks, or an “AI efficiency” narrative, they become part of a larger productivity story.
Layoffs are a metric in this system. A signal. And nothing moves stock like a clean, confident signal that says: “Margins are under control. Don’t worry. We did the math.”
The Rest of the World: Layoffs Without the Drama
In the United States, layoffs are part of the corporate toolkit. They’re timed with earnings, and framed as shareholder-friendly maneuvers. In much of the world, though, that same maneuver would involve multiple regulators, union negotiations, and possibly a priest.
In Germany, you cannot simply trim headcount by sending out calendar invites and HR templates. The works council must be consulted, and if you try to steamroll that process, you’ll find yourself locked in months of negotiations with labor lawyers who have read more case law than your legal team.
In France, layoffs require a Plan de Sauvegarde de l’Emploi. It’s not enough to say the job is redundant. You need retraining, redeployment options, and a thick packet of justification. If the labor authority decides your plan is lacking, they can block it. Not tweak. Block.
Japan offers perhaps the most culturally and legally frictional path to layoffs. Employers are expected to prove that redundancies are a last resort. They must show genuine financial necessity, efforts to avoid job loss, and careful selection. Courts have thrown out layoffs deemed excessive or poorly justified.
In Singapore, if you retrench more than five workers, you’re required to inform the Ministry of Manpower within five working days.
In India, mass layoffs in certain sectors still require government permission, which can stall decisions for months.
Compare this to the U.S., where a clean Form 8-K and a well-worded press release are enough to earn applause from investors. No consultation. No ministry. No delay.
The result? Fewer “strategic” layoff pops outside the U.S. Less Wall Street serotonin. And less livelihoods treated like budget line items.
If you’ve ever had the uneasy sense that your job was less “core value contributor” and more “cost center to be optimized,” that’s because it was. Especially if you’ve spent time inside a U.S.-listed company, where shareholder value may not be etched into the law, but certainly governs the air people breathe.
Layoffs in this context are strategic. They are timed. They are sometimes tested in backchannel calls with analysts before they ever reach your inbox. All in service of the market’s love language: cost savings and margin improvement. Not because the law demands it, but because everyone acts as if it does.
The myth persists that executives have no choice, that they are tragically bound to serve the almighty share price. But they’re not. Boards have wide latitude. The business judgment rule lets them pursue a range of paths, including ones that don’t involve mass layoffs and farewell cupcakes.
So maybe don’t work at a company that treats earnings day like The Purge. Unless you like surprise Zoom calls with HR. In that case, carry on.
At StratEx - Indonesia Business Advisory we help leadership teams navigate restructures that retain key people, manage risk, and avoid long-term talent erosion.. Contact us to make decisions that balance commercial and human outcomes.