Banks are facing mounting criticism from the public and taxpayers for their exuberant bonus pay out despite the global financial turmoil.
Billions of government money is now being used to bail out ailing companies and instead of strategizing their way to brace the difficult times, more money is continued to be spent to reward the highly paid bankers.
More than $70 billion are made available by top banks in Wall Street as staff in banking and financial institutions are waiting in line for fat year-end bonuses and compensation.
The biggest victims of all? The tax payers.
However, a few of the world’s top bank executives intend to lead by example and made themselves exceptions.
Jamie Dimon, the chief executive of JPMorgan Chase & Co, had been reported to have declined his share of 2008 bonuses, which would mount up to a few million dollars. JPMorgan was bailed out through a $25 billion cash injection by the US Treasury Department recently.
Apart from Dimon, Goldman Sachs CEO Llyod Blankfein as well as Merrill Lynch CEO John Thain have also followed suit by agreeing not to receive their bonus this year. Apart from its CEO, Goldman will also impose a major bonus pay cut to about 400 of the bank’s partners below the $1 million figure as the company recorded its first quarterly loss in a space of 10 years. Last year, each partner received a staggering amount between $5 million to $29 million in bonus pay out, making them as Wall Street and London’s highest paid partner executives.
Merrill Lynch was rescued through an acquisition by Bank of America on the same day another investment firm, Lehman Brothers went bankrupt.
The Bank of America, BoA intends to make itself as the new world’s largest bank, but it will come not without collateral damages. And the damage will not look pretty.
The bank, which acquired Merrill Lynch on the day Lehman Brothers went bust in September, announced that up to 35,000 jobs will be cut in the next 3 years. All divisions and business units will be affected with the job cut.
Merrill Lynch acquisition involves a $50 billion rescue deal, with the result of the merger seeing a new, combined workforce total of more than 300,000 employees worldwide. Prior to the merger, Bank of America had close to 250,000 employees while Merrill Lynch had 60,000. The 35,000 figure represents about 11% of the new total employee size.
The acquisition will also turn BoA as America’s largest bank by asset. It will double its investment banking business, as well as own the largest retail brokerage business. Bank of America’s rival, Citibank recently announced a layoff of 75,000 people.
While the final details of the layoff will only be released next year, any impending news shall be deemed as bad.
With multinational companies closing down their shops and shrinking their size of operation, caliber talents became part of the collateral damage and lost their jobs in the process.
Recent major job cuts include Lehman Brothers (the cutting off jobs and eventually the bankruptcy), Merrill Lynch, HSBC, XL Leisure, Qantas Airways, United Airlines and Starbucks.
The one who are busiest are apparently, the headhunters and recruitment agencies.
With many professionals and high flying talents on the loose, the recruitment market is put in feeding frenzy after many professional firms and companies approached established headhunters to sweep them and line them up in front of their office for potential job offers. In the recent weeks, recruitment agencies are made to work harder than ever – with a promise of big bucks.
Apparently, those who lost their jobs are not only their target – it seems that star employees who are retained have also been asked to be approached. With relatively fragile situation in these employees’ companies, the headhunter’s job in persuading them to make a switch will be made easier. And if you’re one of those sparkling assets stuck with a company facing financial difficulties, a phone call may just be around the corner.
On the same day Lehman Brothers filed for bankruptcy, the Bank of America made a move to acquire the ailing Merrill Lynch, in a move that might make the bank as the new largest bank in the world.
Certainly, it is a day full of chaos, with uncertainties lingering on the world economy.
It is also a great escape for Merrill Lynch, which has been in danger of collapsing in the same manner Lehman Brothers did.
As of June, Bank of America is ranked as the world’s second largest bank by market capitalization behind the newly crowned ICBC (Industrial and Commercial Bank of China) from China. The former giant, Citibank fell from first position to 7th, the worst fall it experienced in decades.