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You can tell a lot about a company by the way they treat the employees lowest on its pay scale. Pay cuts and, yes, even layoffs are inevitable in today's economic climate. The decisions are painful, but they're often necessary and unavoidable. They aren't, however, a license to be callous and cold toward the very people who have kept your business running.

Computer vendor HP recently announced significant across the board pay cuts for everyone starting at the top down -- and I do mean everyone. All 100,000 employees on the payroll at HP will suffer some sort of reduction in pay. The exact percentage of the pay cut is based on where the employee falls on the organizational chart, ranging from 15% for Executive Council to 2.5% for non-exempt employees.

The good news? All 100,000 employees get to keep their jobs. To be sure, no one likes a pay cut but I'd wager people prefer it over no pay at all.

In an open letter to HP employees, CEO Mark Hurd -- who is taking a 20% pay cut himself -- said he considered laying off approximately 20,000 people instead of enforcing pay cuts. "Well, I don’t want to do that. When I look at HP, I don’t see a structural problem of that magnitude. There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimization process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time."

In other words, he looked at the big picture and chose to retain his workforce. It's a smart move that I'm sure most of the employees at HP appreciate. In the end, if it turns out to not be enough at least employees will know he tried.

Now, contrast this with the recent announcements of layoffs at Massachusetts-based software vendor Novell. Earlier this month, they laid off approximately 100 employees due to a "global economic downturn." I have to wonder how many of those jobs could have been saved if Novell CEO Ron Hovsepian had declined to accept the sum total of his $6.9 million compensation package last year.

I mean, it's not as if he didn't see the potential for layoffs coming. In a December 4, 2008, conference call with analysts he is quoted as saying, "I think we are just evaluating at this point any additional restructures or activities that may take place in 2009, and those would be largely dependent on the overall economic condition and its impact to our revenues, if any."

In other words, the writing was on the wall late last year but he still grabbed his share of the pie. Sadly, this doesn't seem to be an isolated case. Linux Journal reported earlier this week that the CEO of Texas-based chip maker Spansion, Inc. played his $1 million violin while 3,000 jobs burned.

Even before the bodies are cold at Novell, its PR department put a particularly thoughtless blog post up announcing the new user management technology it recently acquired from Fortefi. "Novell Privileged User Manager [is] a new product that allows granular access control (including immediate termination capability) and auditing of 'super' or 'root' users across multiple systems including Unix and Linux environments."

Essentially, it's a computer system lock-out mechanism an IT department can activate when employees are terminated or let go. Talk about a callous blog post coming from a company that just laid off 100 employees. That's like saying "We're really sorry we had to put all these racehorses down. Oh, look! We bought a glue factory."

I understand that companies have to cut employee pay or face going out of business. I understand that many companies may have to resort to lay offs in order to stay afloat. I'd like to think that the people behind these tough decisions have hearts and are compassionate.

I guess that's the difference between the CEOs of HP and Novell. One is a class act while the other is just an act.

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Last Post by J_Swaine
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I take exception to your article and selective framing of the facts. I'll agree with you on your premise though, you can tell a lot about a company by the way they treat their employees and in this regard Novell in general and Ron Hovsepian in particular (the target of your slander) are exemplary. Don't take my word for it, ask the hundreds if not thousands of current and former employees who speak highly of both the company and Mr. Hovsepian. I've no objection to Mr. Hurd either but if you want to be fair in your comparison, you might have pointed out he earned $15.14M in 2008 and announced a layoff of 24,600 employees last November alone. Both numbers seem a bit larger than the shots you fired at Novell.

Make no mistake, having to lay off even 1 employee is challenging and the way you treat that individual, provide him or her a financial and training bridge to the future does indeed say a lot about the company. I'd have you do a little research and find out exactly how Mr. Hovsepian is perceived - ask the unfortunate employees who were laid off if they feel he is right for the company.

These are indeed challenging times for all - if you want to write an article on character, do a little digging before you assault someone and ruin theirs.

John Dragoon, Novell CMO

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You do have to get your facts right regarding HP: there is no guarantee that there will be no jobs losses, no guarantee that it will be a temporary measure, and most employees at newly acquired EDS haven't seen a pay rise in 5 years. In fact, a large number of people have already "dissappeared" from the work floor.
Now for the percentage... Mister Hurd looses 20% of his salary. Well, HP gave CEO Mark Hurd $25.4 million in cash last year, including a $1.45 million base salary and $23.9 million in bonus money. Plus stock awards worth $7.9 million, $738,392 for miscellaneous items, including $98,000 dividends paid on his restricted stock holdings and $71,482 of relocation compensation. The total amount of pure money he cashed in 2008 is $42,5 million US dollars. (Plus: personal and home security $256,000 and personal use of HP's corporate jet $135,734.) He offers to cut 20% of his BASE PAY, which is $1,450,000 and 20% of that is $290,000 which is only 0.6% of his total income, not 20%...

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@ phat CEO -- Thanks for your comment and for taking time to break down the figures. The larger point I was trying to make is that I think Hurd should be commended for trying to find alternate routes for layoffs. I'm well aware that a number of factors make up a CEO's annual compensation package and giving up a tiny percentage of a gigantic paycheck is probably pretty painless for Hurd. I thought it was a kind gesture, though.

@ jdragoon I find some of your comments puzzling and I'm particularly surprised that someone with your level of experience and education doesn't know the difference between libel and slander. At any rate, thanks for reading, "John."

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Lisa,

Come on...are you serious? You know darn well that "slander" is "a malicious, false, and defamatory statement or report"....we can debate whether that was your intent but not the fun with words game on slander vs libel....if you want to seriously debate your point of view that's fine but if the you want to parse my word choices...well....so be it. John

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I think you need to get your facts right about HP. Mark Hurd has taken a 20% cut on his base salary of $1.5M but he has increased his other monetary benefits to ensure than in "economic crisis" his compensation has increased from $24.5M to $42.5M a staggering 70% increase. He and executive council team has spend more than $500K on personal use(for family) of corporate jet. Mark Hurd has spent $80K on family dinners and lunches( I am not talking about corporate lunches or dinners)- all this in a downturn.
And as far as treating employees is concerned, ask any HP guy & you will get to know the truth. The HP way does not exist anymore. People are made to work like slaves for peanuts.

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It is great that Hurd didn't resort to layoffs, but the pay cuts for executives are misleading as their pay is a small part of their total compensation. Also, the work environment for employees is truly awful. Hurd is correct that it doesn't make sense to cut employees as such a structural re-organization is not warranted, but note doing something because it is smart is not the same as doing something because it is right. HP has taken what is right totally out of the picture. Investigate this more deeply before bestowing accolades.

Edited by Katelyn: n/a

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I am CFO of a nonprofit thats going belly up any day now. I don't have time for sappy female employees and their unstable issues. Especially if they try to blaim their lack of ability to perform, upon my demands, on Breast Cancer that happened almost 1 year ago. Please tell me I am not being insensitive.

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