Column: What we lose on the stock market we take from operations – don’t we?
Can it really be true that Aarhus University had to lay off staff because the stock markets fell? No, because the university’s financial reserves provide a buffer for precisely this kind of uncertainty, thinks Professor Peter Balling, who is a staff representative on the Aarhus University Board. The layoffs were a result of structural deficits, and with timely interventions along the management chain, they could have perhaps been avoided, he writes.
STAFF REPRESENTATIVE’S COLUMN
This column is written by one or more of the staff representatives on the Aarhus University Board or chairs of the university’s five academic councils.
The views expressed in this column are the author’s own.
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Last year Aarhus University faced serious financial challenges. We were hit by a toxic mix of rising energy prices, falling education revenues, and downturns on the financial markets. It was these three reasons that were repeatedly used to justify the energy-saving measures, the hiring freeze and – at some faculties – the cutbacks that resulted in staff layoffs.
But can it really be true that Aarhus University had to lay off staff because the stock markets fell? It sounds an unlikely story. It’s a story rooted in initial statements from the senior management team, and a story that has been kept alive down the management chain by managers who – in my opinion – may have found it easier to blame external factors for necessary measures taken at the university.
Financial reserves are our buffer in difficult times
But the reality is quite different. The AU Board has made a concerted effort to balance its operations and has accepted the fact that share losses have reduced its financial reserves.
It’s true that the AU Board has decided that the university’s financial reserves should equate to between 7.5 and 12.5 per cent of its revenue, and it’s also true that the unpleasant cocktail of factors in 2022 seemed to bring us down to near the lower end of that range. But this is precisely why the university has financial reserves – to be able to handle these fluctuations! They are our buffer in difficult times. Fortunately, this view is shared by other members of the board. Yes, we need to take action when our financial reserves fall to a level that concerns us, but we need to be patient and to remember that, over the years, financial markets have also helped to restore the university’s equity. This could happen as early as this year...
Could layoffs have been avoided?
So, in this column, I’d like to help lay some myths to rest. We were not forced to say goodbye to our colleagues because the stock markets fell. The focus of the AU Board is (and should be) to balance the university's operations. A decrease in educational revenue and basic funds meant that, in 2022, the university’s spending exceeded its income. This pattern would have continued in the coming years and is something a responsible management team needs to respond to – regardless of energy prices. Of course, we may well wonder how such a structural deficit could come as such a big surprise that layoffs were required to counteract it. It must have been possible to predict these underlying structural changes. So, with timely interventions along the management chain, perhaps we would have been able to steer the university on a less radical course – and to avoid staff layoffs and all their negative consequences?