When the Contract Breaks: Management Incentives, AI, and the Governance Problem We Are Not Talking About

On why the system rewards what it should punish

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It was a Tuesday. March 31, 2026, somewhere between 6 and 7 in the morning. Tens of thousands of Oracle employees across the US, India, Canada, and other regions opened their phones and found an email. The message was signed by “Oracle Leadership” and it read: “After careful consideration of Oracle’s current business needs, we have made the decision to eliminate your role as part of a broader organizational change. As a result, today is your last working day. Thank you for your contributions to our organization.”

We have read heartbreaking stories: some employees described watching an internal Slack platform drop from 165,000 to 155,000 users in real time. Others tried to log into the VPN and found their account no longer existed. One employee, a senior director of technical writing with 19 years at the company, told TIME: “This is a job that I was so dedicated to and gave everything to — and none of it matters.”

The stated reason? AI. Analysts had estimated that cutting 20,000 to 30,000 employees could generate up to $10 billion for Oracle, cash flow to fund AI data centers, for which Oracle reportedly had a $20 billion shortfall. Oracle’s stock had dropped 25% since the start of 2026. Was the email the solution?

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This is not my story. But it resonates with my own reality more than I would like.

I was asked to leave the company I worked for 26 years. Not because of a 6 a.m. email, but because of a decision made far above my level. A failed acquisition, one of those that looks in the boardroom like a bold strategic bet, forward-looking and decisive. But it was wrongly priced and devastating on the ground. Thousands of workers and their families paid the price. The executive team that made the decision received their bonuses anyway.

Since then, my focus has been on one question: how do we build governance structures that produce better decisions? Decisions that account for more than the next earnings call. Decisions in which the people who make them also bear the consequences.

When it happened to me, I thought it was an exception. Recent events suggest it is the rule.

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What is a company for?

The question underneath all of this is deceptively simple: what is a company for?

The current answer is very simple: to maximize shareholder return in the shortest defensible timeframe, even though it is baked into compensation structures, board mandates, and analyst expectations, and polished by ESG reporting. Everything else is secondary (or so it seems!). Employees, communities, long-term resilience, they are managed when convenient, and expendable when not.

This is not a law of nature. It is a design choice. And like all design choices, it produces the outcomes it was built to produce.

Between 2022 and 2026, the tech sector shed roughly 600,000 jobs in the United States alone. Oracle, Meta, Google, Microsoft, Amazon, SAP, Salesforce, Ericsson — the list is filled with companies that spent the last decade competing for talent with lavish perks, equity packages, and promises of changing the world. Now they compete on a different metric: how quickly they can cut headcount and call it strategy.

The mechanism is straightforward. When more than half of executive compensation is tied to stock price, and when layoff announcements tend to produce short-term share price increases, the rational CEO move is to cut people, even when the long-term operational damage is real. The market rewards the narrative of transformation before any operational proof exists.

This is not a story about bad people making bad decisions. It is a story about a governance architecture that makes bad decisions the rational ones.

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The contract that existed, and what we lost

For most of the twentieth century, the employment relationship in industrialized economies rested on an implicit contract. It varied in its specific terms — in Europe it leaned toward security; in the US it leaned toward mobility — but the underlying logic was shared: you give the company your time, your loyalty, your energy, and in return the company gives you stability, growth, and a degree of protection (not necessarily for a whole lifetime, but at least while you were in a common agreement).

That contract was never perfect. It excluded many. It was often paternalistic. But it encoded a shared understanding: the company and the worker had a mutual stake in each other’s future.

That understanding has been quietly retired, without any announcement or renegotiation, just eroded through different restructuring waves. Globalization was the first alibi. Digitalization was the second. Now we have AI.

The word “AI” does the same work today that “globalization” did in the 1990s. It gives a management decision the appearance of inevitability. You are not being laid off because of a failed strategy or a board that over-hired during a pandemic. You are being displaced by the future itself, and resistance seems futile.

Except the data does not support the narrative. Oxford Economics, the Yale Budget Lab, the New York Federal Reserve, and Forrester Research have all independently reached a similar conclusion: AI is not actually driving these cuts at scale. The New York Fed found that only 1% of service firms cited AI as the actual reason for recent layoffs. Forrester found that nearly 6 in 10 hiring managers admit AI was cited for layoffs actually driven by budget cuts or the need to unwind pandemic over-hiring. Oxford Economics states bluntly that it “suspects some firms are trying to dress up layoffs as a good news story.”

Klarna is instructive. In 2024, the Swedish fintech deployed an AI chatbot it claimed handled the work of 700 human agents. By 2025, the CEO admitted that cost had become “a too predominant evaluation factor” and that service quality had suffered. They began rehiring. Gartner now predicts that by 2027, 50% of companies that attributed headcount reductions to AI will rehire for similar roles. An Nvidia vice president admitted in 2026 that “the cost of compute is far beyond the cost of the employees” on his team. An MIT study found that AI automation was economically viable in only 23% of the roles being cut.

The companies are not just breaking the contract with their employees. In many cases, they are not even succeeding at the thing they are using as justification.

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Who carries the cost, and where this leads

The sociologist Ulrich Beck had a useful way of describing this moment. The system, he argued, collectivizes profits while individualizing the costs of transformation. Corporate actors and their institutional shareholders capture the upside. The workers (and their families, as I said earlier and meant literally) absorb the instability, the career disruption, the lost income, and the invisible weight of uncertainty.

The CEO-to-worker pay ratio at S&P 500 companies reached 281-to-1 in 2024, up from 31-to-1 in 1978. The year Google announced 12,000 layoffs, its CEO received a compensation package worth more than 800 times the median employee’s pay. The layoff announcement and the pay disclosure landed within weeks of each other.

This is not merely a workplace problem. When the social contract breaks at scale, when large numbers of people experience the system as fundamentally unfair, as one that rewards those at the top for decisions that hurt those below, the consequences do not stay inside the company. They move into politics, into social cohesion, into the kind of polarization and inequality that is already one of the defining risks of our era. These are the kind of problems we want to address at the 4D Community, or at least to understand and discuss, and act on what can be done.

We have seen this before. The dislocation from globalization contributed to a political backlash that reshaped democracies across the Western world. AI-driven dislocation, moving faster and affecting a broader swath of the workforce, including highly skilled knowledge workers who never expected to be vulnerable, carries the same potential, amplified.

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The governance problem we are not talking about

I want to be careful here. The temptation at this point in the argument is to offer a recipe: five things individuals should do to protect themselves, four things companies should do to be more responsible. I have written some version of that, and I cut it, because it misses the point.

Individual resilience matters. Developing portable skills, building external reputations, not depending entirely on a single employer, all of that is worth doing. I practice it and encourage it. But putting the burden of a systemic failure on the individuals who suffer it is not an answer. It is a way of not having one.

The real question is about the design of the system itself.

A well-governed company, in my view, is not one that maximizes shareholder return. It is one that builds resilience and is sustainable, for its workers, for the communities it operates in, and for society over time. These are not soft, secondary concerns. They are the conditions under which a company can actually function over the long run. The short-term optimization model is not just ethically questionable. It is, increasingly, operationally fragile. (And we now know where fragility leads to)

What would it take to move in that direction? Some of it requires companies to voluntarily redesign compensation structures toward long-term outcomes: more vesting periods, metrics that include workforce stability and community impact, board accountability that goes beyond quarterly results. Some of it requires regulatory pressure: stronger worker protections, mandatory transparency in severance and restructuring decisions, governance standards that make executives accountable for the human cost of strategic failures.

None of this is easy. And I am honest enough to say that we are pushing against something very basic: the human desire to accumulate, and the institutional structures that have been built to serve it.

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The question worth sitting with

There is a small signal worth watching. Goldman Sachs found that stocks now fall an average of 2% when layoffs are explicitly framed as AI-driven restructuring. The market, which spent 2023 rewarding this narrative, has begun to grow skeptical. Even the incentive structure, it seems, is not entirely immovable.

But the deeper question is one that no financial signal will answer.

If we agreed (companies, boards, regulators, and citizens) that a well-run company had to be sustainable not just for its shareholders but for its workers and its society, what would we have to change first? And who, exactly, is going to demand it?

I do not have a clean answer yet. But I do have a direction, and I do have a growing conviction that communities capable of thinking seriously about governance, agency, incentives, and long-term sustainability are more necessary than ever. This one, the 4D community, included.

What do you think needs to change — and where does the pressure have to come from?

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Casi Juanes is a board advisor, professor at IE Business School, and Secretary of the 4D Community. His work focuses on cybersecurity governance, AI strategy, and learning design. This post is part of the 4D Community Substack — a space where Dreamers, Doers, Designers, and Doubters think together about the metacrisis and what to do about it.

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Sources

Oracle layoffs — March 2026

• TechCrunch — “Laid-off Oracle workers tried to negotiate better severance. Oracle said no.” (May 8, 2026): https://techcrunch.com/2026/05/08/laid-off-oracle-workers-tried-to-negotiate-better-severance-oracle-said-no/

• TIME — “Oracle Workers Say They Were Fired After Training AI to Replace Them” (April 30, 2026): https://time.com/article/2026/04/30/oracle-layoffs-ai-tech-jobs/

• HR Executive — “Oracle layoffs hit — via a 6 a.m. email” (April 2, 2026): https://hrexecutive.com/oracle-layoffs-hit-via-a-6-a-m-email/

• NY Post / AOL — “Bloodbath at Oracle as staff stunned by brutal 6 a.m. layoffs email”: https://www.aol.com/articles/bloodbath-oracle-staff-stunned-brutal-175343002.html

• Team Blind — “What Happened at Oracle?” (April 3, 2026): https://www.teamblind.com/blog/blind-tl-dr-what-happened-at-oracle-april-3-2026

Market reactions to layoffs

• Fortune / Goldman Sachs — “Goldman Sachs expects layoffs to keep rising — and says investors are punishing the stocks of companies that do it” (Dec 25, 2025): https://fortune.com/2025/12/25/goldman-sachs-research-ceos-layoffs-stock-price/

• Webull — “Layoffs Used To Lift Stocks — Now They Knock Them Down”: https://www.webull.com.my/news-detail/14087756257002496

• LinkedIn / Aadesh Goyal — “One Million Layoffs. Rising CEO Pay. Is This Leadership?”: https://www.linkedin.com/pulse/one-million-layoffs-rising-ceo-pay-leadership-aadesh-goyal-jrxtc

AI as management cover — the data

• Fortune / Oxford Economics — “AI layoffs are looking more and more like corporate fiction” (Jan 7, 2026): https://fortune.com/2026/01/07/ai-layoffs-convenient-corporate-fiction-true-false-oxford-economics-productivity/

• Trax Tech / Yale Budget Lab + NY Fed — “Companies Use AI as Cover for Layoffs Despite Limited Automation Evidence”: https://www.traxtech.com/ai-in-supply-chain/companies-use-ai-as-cover-for-layoffs-despite-limited-automation-evidence

• Forrester Research — “Predictions 2026”: approximately 6 in 10 hiring managers admit AI was cited for layoffs driven by budget cuts or pandemic-era over-hiring correction

• Careerminds — Survey of 600 HR professionals (February 2026): only 8.4% said AI restructuring delivered promised results; 35.6% had already rehired for more than half of AI-laid-off roles

• MIT study (2024): AI automation economically viable in only 23% of roles where it was being used as layoff justification

• Nvidia VP Bryan Catanzaro — quoted in Axios, 2026: “the cost of compute is far beyond the costs of the employees”

Klarna and rehiring reversals

• Klarna CEO Sebastian Siemiatkowski — public statements, May 2025, on cost focus being “a too predominant evaluation factor” and service quality degradation

• Gartner (February 2026): prediction that by 2027, 50% of companies that attributed headcount reductions to AI will rehire for similar roles, often under different job titles

CEO pay and the incentive structure

• Economic Policy Institute — “CEO pay increased in 2024 and is now 281 times that of the typical worker” (2025): https://www.epi.org/blog/ceo-pay-increased-in-2024-and-is-now-281-times-that-of-the-typical-worker-new-epi-landing-page-has-all-the-details/

• AFL-CIO Paywatch 2025 — average S&P 500 CEO compensation $18.9 million in 2024: https://aflcio.org/paywatch

• Pay Governance LLC — S&P 500 CEO Compensation Trends: https://www.paygovernance.com/resource/sp-500-ceo-compensation-trends/

• Business Standard — “Alphabet CEO Sundar Pichai’s pay soars to $226 mn on huge stock award” (2023): https://www.business-standard.com/world-news/alphabet-ceo-sundar-pichai-s-pay-soars-to-226-mn-on-huge-stock-award-123042200102_1.html

• Cornell University — “Layoffs, Top Executive Pay, and Firm Performance” (PDF): https://ecommons.cornell.edu/server/api/core/bitstreams/5789351d-e275-4a05-99eb-b20c5c05b482/content

• LPE Project — “How Shareholder Primacy Hurts Jobs and Wages”: https://lpeproject.org/blog/how-shareholder-primacy-hurts-jobs-and-wages/

The broken psychological contract

• Harvard Business Review — “The Case for Good Jobs” (2017, still cited): https://hbr.org/2017/11/the-case-for-good-jobs

• Gartner (2022–2024 surveys): employees’ willingness to support enterprise change collapsed from 74% (2019) to 43% (2022)

• Richard Sennett — The Corrosion of Character: The Personal Consequences of Work in the New Capitalism (1998): referenced via https://www.philosopheasy.com/p/the-disposable-self

Theoretical frameworks used

• Ulrich Beck — Risk Society (1986) and Individualization (2002): the system collectivizes profits while individualizing the costs of transformation. https://saturnin.info/ulrich-beck/

• Guy Standing — The Precariat: The New Dangerous Class (2011): https://greattransition.org/publication/precariat-transformative-class/

• Nassim Taleb — Antifragile (2012): barbell career structure as hedge against systemic fragility

• Charles Handy — Portfolio Career concept (1989, updated): https://thejolt.substack.com/p/a-chat-with-charles-handy-on-the

• WEF — Future of Jobs Report 2025: https://reports.weforum.org/docs/WEF_Future_of_Jobs_Report_2025.pdf

Connected 4D Community writing

• Alon Rozen — “Your Mind Is Not a Prompt” (May 6, 2026): on the slide from conscious augmentation to passive substitution, a parallel argument at the individual cognitive level

• Nathan Hegedus — “Why AI Feels Like Magic” (April 23, 2026): on eroded capacity and the importance of friction

• Pascal Potvin — unpublished community reflection on AI risks, job displacement speed, and concentration of wealth (2026)