Saturday, May 20, 2017

So there we were, poking around the Calcbench databases just to see what’s happening in corporate filings lately. We were on the Data Analytics page and looked at one of our favorite subjects: restructuring charges.

You can find that in the lower portion of the Data Analytics page, where we list all the footnote disclosures you can study. And as we opened the Restructuring Charges menu, one of the sub-options caught our eye: employee severance costs. We’d never looked at them before. How have those changed over the course of recent history, we wondered?

We examined employee severance costs reported each quarter, from January 2014 through first-quarter 2017. Total expenditures rose 9 percent, from $1.25 billion in 2014 to $1.36 billion last quarter—although severance costs hit a high-water mark of $1.89 billion at the end of 2015, and then dropped to lower levels last year.

The pattern is shown in Figure 1, below, with the trend line in red:

Interesting, although we’re not sure anyone laid off this year feels 9 percent richer than someone who lost his job in 2014. Then we looked at average severance costs per company—and the key point in Figure 2, below, is “whoa.”

Employee severance costs per company have soared in the last three years: up 88 percent, from $4.64 million in 2014 to $8.72 million in first-quarter 2017.

So the obvious question is why these costs have spiked. Are companies laying off more employees? Are they 88 percent more generous with severance packages? (OK, that one is more a rhetorical question.) Are companies separating from more senior executives who might command higher severance packages? Lots of CEOs have merged their companies out of existence, after all; and departing CEOs tend to get a nice parachute when the new brass exit them off the plane.

From the data we pulled here, in aggregate, we can’t tell. The next step—perhaps for some enterprising adjunct professor in labor studies bucking for tenure—would be to study those disclosures company by company. Pour all that data into a spreadsheet (don’t forget our cool Excel Add-In), and trace interesting numbers back to the accompanying narrative disclosure; that would give you the picture.

Yet again, however, Calcbench can quickly and easily start you on the path to insight. After that, we can take you wherever else your financial research and analysis impulses take you.

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