Business Ethics / Corporate Social Responsibility / Organizational Strategy

Oracle’s Backlash Over Recent Winter Break Policy

 

oracleConnor Walsh

JPM Securities’ Patrick Walravens recently cut his rating on shares of Oracle from Market Perform to Market Underperform citing many developments he referred to as disturbing, specifically mismanagement.2 A string of unpopular decisions has not only negatively impacted external relationships with Oracle’s customers and shareholders, but a recent policy designed to regulate how employees spend their vacation days has created an even more alarming internal rift within Oracle.[1] In a recent memorandum to all employees in the U.S. the co-CEOs, Mark Hurd and Safra Catz, announced a winter break between Christmas and New Year’s 2015. During this time all “non-critical U.S. operations will be closed for business and all employees not supporting critical operations will be on break.” [2]

oracle-ceoWhile this may sound like a benevolent holiday gift for employees, it is quite the opposite. The memo goes on to say that all employees will be required to take the four business days between the paid holidays of Christmas and New Year as vacation days. If an employee had used all accrued vacation time, they will owe the company for these vacation hours. According to one employee this translates into working for six pay periods or 3 months into 2016 to ‘pay back’ Oracle for the vacation used during the holiday season.[3] Employees are justifiably upset. While many tech companies shut down during this holiday week, Oracle is mandating that the employees use their paid time off or vacation time in this way. Employees believe this is just a trick at employee expense for getting accrued paid vacation days off of the balance sheet before the next year.

While Oracle will face no legal repercussions for these actions and it is well within its power to impose such a rule, it does raise many practical and ethical concerns. Whether or not this is a clever ploy to manipulate the balance sheet or not, which itself is an undeniable ethical dilemma, the employees are crying foul and lamenting a lack of institutional justice. Oracle did not announce this policy until September, well after many employees depleted their paid time off for summer vacations. Is it fair to retroactively punish those who planned to work between Christmas and New Year’s Day? While the move may excite shareholders, it has alienated the employees and the media coverage has dealt an unforeseen reputational blow. As the holiday season approaches, Oracle has shown no sign of changing this policy.

Only top management knows the motivation behind this decision, but from the outside, cutting employee vacation days to improve the bottom line has all the necessary characteristics of a firm that believes in shareholder primacy,[4] which as a recent study by MIT asserts, is not only an unpopular decision but also an unprofitable one.[5] Although the immediate fiscal effects will reflect favorably on Oracle, the long-term exposure may not be as friendly. Alienating employees often leads to disengagement and disengagement often leads to a drop in productivity. In the coming year, Oracle may not get the value from these disgruntled employees that it would expect. Only time will tell how this policy will shape the culture at Oracle, but after facing such fervent and persistent backlash, Oracle may choose to reconsider its position next year. Hopefully Oracle can embrace the holiday spirit and perform a little more CSR in favor of their employees

Sources:

[1] Rosenbush, Steve. “Oracle Co-Chief Mark Hurd Says Customer Relationships Progressing.” The CIO Report RSS. The Wall Street Journal, 26 Mar. 2015. Web. 23 Nov. 2015.

[2] Ray, Tiernan. “Oracle: JMP Says Sell on Amazon Competition, Questionable Cloud Deals.” Tech Trader Daily RSS. 14 Oct. 2015. Web. 23 Nov. 2015.

[3] Bort, Julie. “Oracle Employees Fear They Could ‘owe’ the Company Vacation Time, Thanks to a Holiday Furlough.” Business Insider. Business Insider, Inc, 30 Sept. 2015. Web. 23 Nov. 2015.

 

[4] Shareholder primacy is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other corporate stakeholders

 

[5] Scott, Ryan. “The Bottom Line of Corporate Good.” Forbes. Forbes Magazine, 14 Sept. 2012. Web. 23 Nov. 2015.

 

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