It's the Workforce, Stupid!(The Talk of the Town)

Publication: The New Yorker

Publication Date: 30-APR-07

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COPYRIGHT 2007 All rights reserved. Reproduced by permission of The Condé Nast Publications Inc.

In the nineteen-nineties, with U.S. corporations in the midst of what the Times called "the downsizing of America," a new term appeared: the "seven-per-cent rule." It was a simple formula: when a company announces major layoffs, its stock price jumps seven per cent. No one worried too much about whether the rule was accurate--it was a catchy way of expressing a basic assumption about corporate layoffs: downsizing is an easy way to make Wall Street happy. So when, recently, two companies with lagging stock prices--Circuit City and Citigroup--announced major job cuts, one might have expected their stock to soar. Instead, Circuit City saw its stock price tumble four per cent the day after it announced it was getting rid of thirty-four hundred of its most experienced sales associates, and Citigroup's stock barely budged when it said it would...

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