Zoom Drastically Downsizes As Lockdown Demand Falters, CEO Will Reduce His Own Salary By 98%

 Zoom announced on Tuesday that the company would dismiss 15% of its workforce as the demand surge caused by government lockdown mandates continues to subside.

Zoom CEO Eric Yuan said in a memo to the company that some 1,300 individuals would lose their positions. Beyond the slowdown in new demand, he referenced broader economic uncertainty and its effects on customers to spend on services.

“We built Zoom to remove the friction that businesses felt when collaborating. Our trajectory was forever changed during the pandemic when the world faced one of its toughest challenges, and I am proud of the way we mobilized as a company to keep people connected,” the executive wrote. “To make this possible, we needed to staff up rapidly to support the quick rise of users on our platform and their evolving needs.”

The company tripled in size within two years, but neglected to “take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably, toward the highest priorities.” Members of the executive team will reduce their base salaries by 20% and forfeit their corporate bonuses, while Yuan will pass on his bonus and 98% of his salary.

Shares for Zoom increased 9.9% on Tuesday following the announcement. The company’s stock has declined 40.7% over the past year, significantly underperforming the S&P 500 Index and the technology-heavy NASDAQ Composite.

Many companies allowed employees to work from home when lockdowns shuttered offices across the country three years ago. As the mandates subsided, however, many firms have experienced difficulties drawing workers back to the office. Time savings from avoided commutes, as well as new opportunities to more easily balance work and personal matters, are primary benefits cited by remote and hybrid workers, according to a poll from Gallup.

On the other hand, costs induced by virtual work arrangements are palpable for employers: 85% of business leaders say the shift to hybrid work “has made it challenging to have confidence that employees are being productive,” according to a study from Microsoft.

Several executives have voiced a preference for employees to cease remote work. Tesla CEO Elon Musk told employees at the electric automaker that work-from-home is “no longer” acceptable and commented on social media that those who disagree with the new rule “should pretend to work somewhere else.” During a meeting with Twitter employees before his acquisition of the social media company was finalized, Musk was asked about remote work, leading him to assert that working “on location physically” is far superior to other arrangements.

The dismissals at Zoom follow headcount reductions among other technology companies. Microsoft, Google, and Amazon revealed their intentions to decrease payrolls by more than 40,000 combined workers over the past few weeks as key investors noted that rapid increases in compensation has caused lower profitability. Many companies increased hires after the lockdown-induced recession in response to elevated consumer demand.

More than 66,000 workers have been dismissed from leading technology firms in the first month of 2023, according to a report from Crunchbase, even after companies in the sector dismissed some 140,000 positions last year.