D&D General WotC Founder Peter Adkison On Hasbro's Layoffs

Peter Adkison, who owned Wizards of the Coast until it was sold to Hasbro in 1999, oversaw the relaunch of Dungeons & Dragons with D&D 3rd Edition. Today, he commented on this week's round of Hasbro layoffs, which have ripped through WotC. Adkison left WotC in 2000 and currently runs a production company called Hostile Work Environment.

Like many of you, I'm saddened to learn about the layoffs at Hasbro.

Caveat: I have no idea of what’s happening behind the scenes at WotC. If you’re asking who’s at fault, or to what extent it was or was not justified, that’s outside the scope of my knowledge. This post is about my own reflections.

When I read about the layoffs at Hasbro my immediate feeling was shame. Shame for when I did the same thing, at the same company (WotC, before we sold it to Hasbro).

I have made lots of mistakes, tons of them, more than I can even remember. And while I regret those mistakes, and I’m sad for those hurt, I realize it’s part of learning and it’s part of being human.

But layoffs, when handed poorly, or when they are unnecessary, aren’t just mistakes. They are failings of character. Those times when I had a failure of character, those are the moments that haunt me.

 

[NotAYakk]

So he isn’t actually paid $9m cash is he? The majority is bonus through stock options which are tied to the success of the company and couldn’t be used to pay for employee salary either way.

Stock Options are transfers of wealth from the stock holders to the CEO at the instructions of the company.

You can definitely choose to transfer wealth from the stock holders to the employees instead of to the CEO in a way that has the same impact on Stock Holders that giving the CEO options would.

Now, would the CEO make the same decisions that they would if they got a huge bonus for making them?

If I give you an option to buy stock at prices 1 year ago every year, I have lots of incentive to do whatever it is I can to juke up the price of the stock when those options vest.

Suppose I have two choices. Choice 1 is an investment strategy that saves my coworkers and friends jobs, but has a long term payoff not an immediate one.

Choice 2 is a strategy that makes my books look better. Higher profits, lower costs.

Note that finding those long term benefits from Choice 1 is hard: you are 75% sure they exist, but on paper your company will look worse for the next 3 years (higher costs, lower profits).

Now offer that person 6 million dollars extra per year for 3 years for making Choice 2. Oh, and if they make Choice 1 and they are right and they are still CEO in 5 years, they get 25 million dollars.

Option based renumeration "align executive incentives with shareholder value", but it is value in the sense that the long term is a sequence of short terms.

Don’t get me wrong I’d say $1m is still an outrageous amount to earn for a yearly salary for any person but I think folks have to look at the market. Presumably Chris has some skills and experience that makes Hasbro’s board feel they will see that money back and then quite a bit extra and that it was worth them paying it.

CEOs pay is lottery type rewards. You have piles of people climbing the corporate ladder who see the C-suite reward and consider it part of their incentives.

Every dollar you pay a C-suite not only provides incentives to them, but to a pile of other people.

Second, you are going to ask them to do things like "fire your friends and coworkers", and if they won't you'll can them. High pay moves someone into a new social class, and aligns their view of the world with the owners of the company, not coworkers.

An entire system of boards and C-suites self perpetuates this culture. C-suite pay is set by boards inhabited by C-suite social class.

Imagine looking at a feudal society and saying "well, those nobles must be 100x more productive and useful than the serfs, otherwise the king would fire those expensive nobles and replace them with cheaper serfs!"

The nobles, earning lots of money, must exist in order to provide the king with people invested in shoring up the status quo. They don't have to be "worth" that money - the fact they are earning that money is a requirement of the job. If they didn't earn that money, they wouldn't be motivated to uphold the status quo. You could pick a different subset of the population and give them the same money, and so long as they where confident a revolution like it wouldn't happen again they would also do just fine as nobles.

Now, it does take a bit of time to train the noble in the stuff they need to do to maintain the status quo, but that is mostly a matter of preparation and culture, not talent or any such nonsense.

 

[billd91]

I'm not sure how many times I need to keep saying this, but I'm not speaking for you. When I say "most people do this." that in no way means you unless you're putting yourself in that group. I didn't say "everyone". I didn't say "Whizbang Dustyboots".

Well, technically, you did say:

The funny thing is, despite the attacks and criticism at Chris, I'd bet nearly everyone here would take the same deal he did without a second thought or complaint.

So, you did put it in the context of "nearly everyone here" presuming nearly everyone on ENWorld. Not most people in general. So is it surprising Whizbang Dustyboots might pipe up on that? Not really, no. You put "nearly everyone here" into that particular bucket.

 

[Zardnaar]

Stock Options are transfers of wealth from the stock holders to the CEO at the instructions of the company.

You can definitely choose to transfer wealth from the stock holders to the employees instead of to the CEO in a way that has the same impact on Stock Holders that giving the CEO options would.

Now, would the CEO make the same decisions that they would if they got a huge bonus for making them?

If I give you an option to buy stock at prices 1 year ago every year, I have lots of incentive to do whatever it is I can to juke up the price of the stock when those options vest.

Suppose I have two choices. Choice 1 is an investment strategy that saves my coworkers and friends jobs, but has a long term payoff not an immediate one.

Choice 2 is a strategy that makes my books look better. Higher profits, lower costs.

Note that finding those long term benefits from Choice 1 is hard: you are 75% sure they exist, but on paper your company will look worse for the next 3 years (higher costs, lower profits).

Now offer that person 6 million dollars extra per year for 3 years for making Choice 2. Oh, and if they make Choice 1 and they are right and they are still CEO in 5 years, they get 25 million dollars.

Option based renumeration "align executive incentives with shareholder value", but it is value in the sense that the long term is a sequence of short terms.


CEOs pay is lottery type rewards. You have piles of people climbing the corporate ladder who see the C-suite reward and consider it part of their incentives.

Every dollar you pay a C-suite not only provides incentives to them, but to a pile of other people.

Second, you are going to ask them to do things like "fire your friends and coworkers", and if they won't you'll can them. High pay moves someone into a new social class, and aligns their view of the world with the owners of the company, not coworkers.

An entire system of boards and C-suites self perpetuates this culture. C-suite pay is set by boards inhabited by C-suite social class.

Imagine looking at a feudal society and saying "well, those nobles must be 100x more productive and useful than the serfs, otherwise the king would fire those expensive nobles and replace them with cheaper serfs!"

The nobles, earning lots of money, must exist in order to provide the king with people invested in shoring up the status quo. They don't have to be "worth" that money - the fact they are earning that money is a requirement of the job. If they didn't earn that money, they wouldn't be motivated to uphold the status quo. You could pick a different subset of the population and give them the same money, and so long as they where confident a revolution like it wouldn't happen again they would also do just fine as nobles.

Now, it does take a bit of time to train the noble in the stuff they need to do to maintain the status quo, but that is mostly a matter of preparation and culture, not talent or any such nonsense.

The upper class pays little tax and performs little of the required work.

Middle class pays most of the tax, performs most of the work.

Lower class exists to terrify the middle class.

 

[Dire Bare]

I'm not sure how many times I need to keep saying this, but I'm not speaking for you. When I say "most people do this." that in no way means you unless you're putting yourself in that group. I didn't say "everyone". I didn't say "Whizbang Dustyboots".

I got it. I'm comfortable saying, "nearly everyone who read @Sacrosanct's post likely understood his point without getting offended". If you're convinced @Sacrosanct is "speaking for you", good lord, just be like Elsa and let it go.

Many, if not most folks, would certainly accept a baller salary if offered. A few folks might counter with, "Pay me less, and pay my staff more, and I'll take the job". Or after accepting that 9 mil, "Can we skip the layoffs if I take a 50% hit to my salary and/or bonuses??" Folks have done it before, folks will do it again, and mad respect for that level of wisdom, altruism, and restraint. But most folks would take the 9 mil, and when it's time for layoffs, shrug their shoulders and keep that 9 mil.

Disagree? Cool. Not you? You'd make a different choice? Respect. But chill out with the whole, "don't speak for me, how insulting" diatribe, this thread is getting hard enough to follow. Well, please let it go, as I'm certainly no mod.

 

[Sacrosanct]

Well, technically, you did say:

So, you did put it in the context of "nearly everyone here" presuming nearly everyone on ENWorld. Not most people in general. So is it surprising Whizbang Dustyboots might pipe up on that? Not really, no. You put "nearly everyone here" into that particular bucket.

Bolded for emphasis. That word means something. Most notably, NOT everyone.

 

[cbwjm]

I had no idea that Hasbro bought WorC in 1999, I thought that was kind of recent.

 

[Zardnaar]

I had no idea that Hasbro bought WorC in 1999, I thought that was kind of recent.

Heh lol. Tgat was about the last tine WotC was "good".

 

[mamba]

The company funds it’s in entire business simply from its own profit?

yes, or at least without taking on debt or issuing shares (they do cooperate with other companies on a product in some cases)

Never took a bank loan, or an overdraft. Never sold shares?

no, the three founders hold all the shares ever since it got converted to stocks

Makes you wonder how they got started.

By being three guys that knew each other and decided to work together, for the client they had at the time (the company they wanted to be hired by, but had a hiring freeze and found it easier to have a new contractor than new employees)

Good for them though. They’re a rare beast. Masters of their own destiny. Imagine what they could have achieved with more resources?

definitely good for them, hard to say what they could have accomplished. For one times were different then, so they did not have access then (but they also never wanted it once they could have had it…) for another many companies grow too fast and crash and burn, if access to money is too easy

 

[Turgenev]

Sorry, wrong thread.

 

[Whizbang Dustyboots]

Here's Auriga Sirkinos, Chief Mage of Usamigaras (from B4 The Lost City).

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The Hasbro board of directors!