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Comment by gamesurgeon | Hacker News Reader

"A week later, Smith published an open letter calling for Yahoo to...merge with AOL. Redundancies could be eliminated, thousands of people could be fired and two former Internet superpowers would be downsized into a single and steady (if uninspiring) entity...'We trust the board and management will do the right thing for shareholders, even if this may mean accepting AOL as the surviving entity'"

I see where Smith is coming from, but that doesn't make his case any less unsettling. Do some economists really believe that the "right" thing to do is fire thousands of people?

Are a company's shareholders really more important than its employees?

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> Do some economists really believe that the "right" thing to do is fire thousands of people?

Yes. The idea is that they'd be more productive in other companies (or start their own). In a country with decent employee protections, unemployment provisions, and public healthcare, it can even be more-or-less true.

> Are a company's shareholders really more important than its employees?

Yes. With employees, there is a contract, which in some fictional-economics sense was a negotiated agreement between equals, so the company only has those obligations laid out in that contract (just as with bondholders). With shareholders there is no contract, instead the company has a fiduciary duty to act in their best interests.

No. A company's most important duty is to its customers; without them there is no income or profit. Its second most important duty is to its employees; without them there are no products or services to sell to the customers. Coming in third are the stockholders; the parasites who risk a bit of capital in order to profit from people who actually produce things.

Fewer and fewer people believe this myth nowadays as opposed to 10-15 years ago.

https://hbr.org/2010/04/the-myth-of-shareholder-capitalism

Jack Welsh never did believe it.

http://www.forbes.com/sites/stevedenning/2013/06/26/the-orig...

I take it you don't agree with the story you mention from your tone, so I'm not arguing with you.

However, as the concept of work to rule (http://en.wikipedia.org/wiki/Work-to-rule) shows, employees don't treat themselves as being only obligated to do what their contracts specify, and it would be disastrous if they did. Similarly, managers view themselves as owing something to their employees that's not specified in the contract.

Hostile takeovers often work by going into a company and breaking all the relationships of trust that previously existed. By doing that, you can often cut costs in ways that the previous management couldn't do. (Here's the paper, though I confess I've only read the summaries of it: http://www.nber.org/chapters/c2052.pdf)

"Are a company's shareholders really more important than its employees?"

Shareholders in this sense actually represent financial responsibility.

One could argue that Yahoo! has been hurting it's employees by failing it's shareholders (financial obligations). As a result, massive layoffs will be required, whereas if Yahoo! had maintained it's health, it's numbers would have grown/shrank organically.

In this sense, the Alibaba money only delayed, and made worse the correction to Yahoo!'s underlying business model.

While I can't answer your question(s), I do wonder why Yahoo and AOL fill me with no feeling whatsoever. This, for as long as I can remember (save a few select years in the mid 90s). It's amazing how these companies can still be around, though I understand "Middle America" still uses them.

Yahoo sports is really good, for example. It's not a bad aggregator in general and has good original content mixed in.

I don't understand the synergy with AOL at all. What does AOL bring to the table?

This may seem odd, but if I knew I could make a soft-landing (live on savings or benefit for a while) I'd be fine with getting let go. I now live in a country where people can do this and it stuns me that I don't see more entrepreneurship; if I could spend 6 months living in a meager fashion but sure of a roof over my head I'd take it in an instant to work on starting my own thing. I can't though (I used to live in the US where it's too easy to wind up in the gutter, and where I live now I'm not a citizen), so I value my job very highly.

I don't understand your sentiment here. If there is a large overlap and both companies are struggling (and struggling is dying when you're an Internet company), why not eradicate inefficiencies and try and build a stronger player?

AOL and Yahoo are not beholden to provide for their employees in perpetuity. That's a very Japanese mindset.

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