Firms loath to reveal layoffs

But openness may be growing

Staff WriterJune 12, 2009 

Computer maker Dell's refusal to disclose how many employees it laid off at its Winston-Salem plant this spring triggered a full-blown controversy.

City officials were upset because in 2004 they offered $20 million in incentives to lure Dell's manufacturing plant to Winston-Salem. Some of that incentive money depends in part on the number of jobs created. With an unknown number of job cuts, the officials lacked an up-to-date employee tally.

Mayor Allen Joines complained the company's stance was "not acceptable to our community."

Although the criticism aimed at Dell's secrecy was unusual, it's not uncommon for companies to be tight-lipped about job cuts.

Some won't even acknowledge that layoffs have occurred. Others provide company-wide layoff numbers but balk at providing specific numbers for individual sites.

Some of the Triangle's largest corporate employers -- including Caterpillar, GlaxoSmithKline and IBM -- declined to disclose specific numbers when they cut local jobs earlier this year.

Labor and public relations experts say some companies don't want to discuss layoffs because they fear they will be perceived as struggling or because they're cutting jobs at one site at the same time they're seeking incentives elsewhere. Others may be leery of questions about efforts to shift jobs overseas.

"They don't like the bad publicity," said Ross Eisenbrey, vice president of the labor-leaning Economic Policy Institute in Washington. "It gives them a black eye in the community if they are cutting the work force."

No-comment or little-comment layoffs have become more evident in light of the waves of recession-induced job cuts.

Even though signs of stability are popping up on the economic front, job losses remain high. An estimated 532,000 workers were cut from U.S. company payrolls in May, little better than 545,000 in April, according to the business services company Automatic Data Processing.

Although the federal Worker Adjustment and Retraining Notification Act requires companies to disclose significant job cuts, the act has plenty of loopholes and lacks enforcement teeth. One government study found that two-thirds of the companies that should have reported layoffs didn't do so, Eisenbrey said.

Publicly traded companies have to report major financial charges related to job cuts, but there are no requirements to disclose layoffs, said James Cox, a professor of securities law at Duke University.

"That, no doubt, explains the unevenness of how [public] companies report this," Cox said.

Still, privately owned companies, accustomed to keeping information about their business to themselves, are less likely to be upfront about layoffs than publicly traded ones, said John Challenger, CEO of the outplacement company Challenger, Gray & Christmas.

Lenovo, the Chinese computer maker, is among the companies that have decided that secrecy isn't the best policy.

When Lenovo cut jobs at one of its world headquarters in Morrisville in January, it spelled out that it was eliminating 250 jobs -- but that the net reduction was 100 after accounting for shifting a call center from Toronto. The company pointed to the latter as a demonstration of its continued commitment to North Carolina.

"We feel it is better to be upfront about the number of employees involved, so that the different audiences affected know where we stand and where they stand," said spokesman Ray Gorman.

Ben Rosen, a professor at UNC-Chapel Hill's Kenan-Flagler Business School, said some companies think transparency is a good policy. "If we are proactive and disclose what we're doing and why we're doing it,' he said, "we can control how it is reported better."

IBM often doesn't disclose layoffs or even confirm that they have occurred. The company employs more than 10,000 at its Research Triangle Park campus and has had gone through several rounds of local layoffs recently. "IBM...complies with all legal requirements in the U.S. for job notification," spokesman Doug Shelton said. "With acquisitions, divestitures, movement across businesses units, hiring and reductions, our population is constantly changing."

GSK typically doesn't disclose job cut numbers because the company cuts positions, not workers, and those positions "may or may not be filled," said spokeswoman Mary Anne Rhyne.

"Typically, if we cut a position that is filled, we give the employee an opportunity to apply for other jobs," Rhyne said.

After Winston-Salem officials raised a stink about Dell's lack of disclosure, the computer company reversed itself. In an appearance at a city council committee meeting May 11, a Dell executive revealed that the Winston-Salem plant employed 1,140 after laying off 260 workers in two rounds of layoffs.

But Dell spokesman David Frink said the computer maker especially doesn't like to cite specific job cuts at its manufacturing sites for competitive reasons.

"The number of people employed gives competitors information about the production at that specific facility, based on their knowledge of computer systems manufacturing," he said.

That didn't stop Dell from issuing a news release two years ago highlighting that its Winston-Salem plant had passed the 1,000-employee mark ahead of schedule.

"In the early going in North Carolina," Frink said of that announcement, "the interest level was such, in terms of total employment [that] we did periodically provide a very public update of our employment."

Although it's not hard to find examples of companies that aren't forthcoming about job cuts, the trend is toward disclosing more information, Challenger said.

"We are in the age of transparency," he said.

Bloomberg News contributed to this report. or 919-829-4877

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