This is by no means a new story, but today Coles Myer announced it would sack 2500 people and the share price went up.

“Shares in retailer Coles Myer gained in early trading after it announced it would slash 2500 jobs and cut the pay of senior management, Coles Myer shares were trading at $14.55 at 10.25am, up 35 cents or 2.5 per cent on yesterday’s close. On the same morning it announced an 82 per cent jump in profit, the country’s second largest retailer said it would shed 1750 permanent support roles from the business by the end of this financial year and a further 750 over the following twelve months. The job cuts would save the company $363 million a year, it said. The company currently employs about 165,000 people in Australia and New Zealand.

” “The board believes this strategy will provide substantially more value for shareholders than the highly conditional proposal received from the leveraged buyout consortium last month,'’ said chairman Rick Allert.”

The difference in this case is that they’re not cutting costs primarily to increase profits, but to increase profits so to convince their shareholders not to sell and avert a hostile (and foreign) takeover. A worthy cause perhaps, because were a hostile takeover to occur, the loss of jobs would be far greater (one interest is apparently known for stripping companies) and the detriment to the Australia immense. But it really is an illustration of how flawed the shareholder system is for both protecting employee interest, national interest and really, the own company’s interest. It’s callous to watch how creating unemployment is consistently rewarded even though it is dubious that it gives any longterm benefit to the company.

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