Goldman Sachs, Morgan Stanley plus others spend $1billion on redundancies
Although downsizing may save money in the long term, it isn’t a cheap exercise. Reports have emerged that leading American financial institutions have shelled out upwards of a billion dollars on termination pay in the first two quarters of this year. This pain is a repercussion of Wall Street’s over-aggressive expansion strategy during the COVID-19 pandemic.
On Wednesday, Goldman Sachs, severely impacted by a slump in trading and investment banking, was the latest banking behemoth to announce a financial hit due to recent staff retrenchments. The bank disclosed it had incurred $260mn in severance-related expenses during the year’s first half. Goldman has dismissed around 3,400 personnel, which is approximately 7% of its total workforce, this year.
A day earlier, Morgan Stanley, which has already terminated about 3,000 of its employees this year, revealed that it had paid over $300mn for staff layoffs, including nearly $80mn to wealth management employees. Meanwhile, Citigroup declared last week that it had spent an additional $450mn on severance pay. The bank announced in the previous month that it was nearing the completion of 5,000 job reductions.
Options Group’s Michael Karp, a prominent Wall Street recruitment specialist, told The Financial Times that more workforce adjustment is likely in investment banking. He predicted, “For the remainder of the year, many of the larger firms will likely follow a dismiss-two-recruit-one approach.”
Several Wall Street companies now admit they expanded their workforce excessively during the pandemic to keep up with a surge in trading and deal-making activities, even as remote working affected efficiency.
The drastic shift from boom to bust in recent years has been remarkably swift,
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