Zoho founder Sridhar Vembu took to X on November 8 to condemn Freshworks layoffs, though without directly naming the company.
His remarks were aimed at corporate priorities, shareholders over employees, specifically highlighting Freshworks’ decision to lay off 660 employees despite having over a billion dollars in cash reserves and a healthy growth rate.
Freshworks Lays Off Employees But Plans To Buy Stocks
Freshworks, a leading Software-as-a-Service (SaaS) company, recently announced it would cut 13% of its workforce as part of a strategic effort to streamline operations. This move came alongside the announcement of a $400 million stock buyback, which led to a sharp 28% surge in the company’s stock price on the US markets. The timing of the layoffs, coming just after these financial decisions, prompted Vembu to speak out, underscoring what he saw as a troubling trend in corporate culture.
Vembu’s comments highlighted the stark contrast between Freshworks’ financial health and its decision to reduce its workforce. “A company that has $1 billion cash, which is about 1.5 times its annual revenue, and is actually still growing at a decent 20% rate and making a cash profit, laying off 12-13% of its workforce should not expect any loyalty from its employees ever,” he wrote on X. “And to add insult to injury, when it can afford $400 million in a stock buyback.”
Vembu’s critique was sharp, describing the layoffs as “naked greed,” especially given Freshworks’ significant cash reserves. He expressed his belief that the decision was driven by shareholder interests rather than the well-being of employees. “I can understand the unfortunate reality of layoffs when a business is struggling or declining and making a loss. This is not that situation,” he added.
The Zoho founder also questioned the leadership of Freshworks, asking if the company’s management lacked the vision to reinvest the $400 million in more innovative areas or even redeploy the workers who were being laid off. “Don’t you have the vision and imagination to invest $400 million in another line of business where you can deploy those people you hired but you don’t want anymore?” he challenged. Vembu’s comments suggested that Freshworks’ leadership may be “lacking in curiosity, vision, and imagination,” as well as empathy toward the employees they were letting go.
A Broader Trend
Vembu’s frustration was not limited to Freshworks alone; he expressed concern about a broader trend in the corporate world, particularly in the United States, where similar practices of prioritizing shareholder returns over employee welfare have become more common. “This behavior, sadly, has become all too common in the US corporate world, and we are importing it in India,” Vembu said. “It has only resulted in large-scale employee cynicism in the US, and we are importing that too.”
Zoho’s Different Approach
The comments highlight a tension that has emerged between Silicon Valley-style corporate practices and the values upheld by Vembu at Zoho. He made it clear that Zoho’s approach is fundamentally different, focusing on long-term employee loyalty and customer satisfaction rather than short-term financial gains for shareholders. “We put our customers and employees first. Shareholders should come last,” Vembu concluded, reinforcing why Zoho remains a privately held company. By staying private, Zoho is not beholden to the pressures of Wall Street, allowing it to prioritize the well-being of its employees and the satisfaction of its customers.
Zoho-Freshworks Feud
This isn’t the first time that Vembu has made waves with his outspoken opinions. Zoho and Freshworks have a contentious history, with Freshworks’ founder Girish Mathrubootham having worked at Zoho before launching his own company in 2010. The two companies were embroiled in a legal battle starting in 2020, when Zoho accused Freshworks of stealing its confidential information. The case was settled in 2021 when Freshworks admitted that a former employee had wrongfully accessed Zoho’s sales data.
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