Credit Suisse is looking to slash $2.5 billion from its costs, and plans to do so by cutting 4% of its employees worldwide, composing over 50,000 jobs, and plans to do so by the end of 2012.
The cost-saving measures come as a result of a precipitous 52% drop in profits, down to about $1 billion, due to a combination of strong currency and weak trading, also cited as causes of similar financial problems experienced by UBS, who plans to cut costs with workforce reductions as well.
Credit Suisse claims the cuts will be in all divisions, including domestic workforce reductions in its home of Switzerland, but particularly from the investment banking division, whose results were considered disappointing.
Many analysts, including announcements from the bank itself, expect these sorts of financial problems to continue in the near future, as the global economic recovery has been slower than anyone involved would have preferred, and is likely to continue for quite some time, with similar job cut announcements coming from HSBC (despite rising profits, oddly enough), and major earnings disappointments coming from other major banks as well.
Absent in such announcements are cost-cutting measures on the part of high-level executives, oddly enough, or perhaps expectedly. Though workforce reductions are not the only method of cost-reduction these banks are likely to employ, they are certainly the only one announced. Though part of that is due to the fact it will make headlines due to its direct relevance to an uncertain job market, announcements are few and far between of CEOs and other top-tier employees taking a cost cut of their own.
Conversely, executives in Japan have a rather different approach, taking a pay cut or eliminating their salary altogether during the period in which their businesses are suffering enormously; the Fukushima disaster prompted the top-level Tepco leader to forgo his salary until the disaster was fully resolved. By comparison, the CEO of BP received a performance bonus for the year of the oil spill disaster due to safety bechmark achievements. Such is the cultural dichotomy between these two organizations that the executives view their roles as entirely different, with humility only to be found on one side of the ocean.
Though it is likely other austerity measures will be in place at the bank, it is rather rareâ€"â€"to the point that it is nearly unheard ofâ€"â€"that cost-cutting measures ever occur from the top level down. HSBC even announced job cuts despite increasing profits. Do CEOs ever cut their own pay to preserve employment for those at the bottom rung, whose performance had nothing to do with the company’s failure? Secretaries, tellers, and other low-level employees are the ones who are cut from the balance sheets of failing companies, while CEOs, whose decisions led to such failureâ€"â€"or whose salary could be reduced with no downside, if the failure was not his or hersâ€"â€"stay wealthy.
It is highly unlikely such a culture will evolve toward something different in the future, though perhaps the younger generation, growing up with its less than stellar job prospects, while they read every day in the newspaper about rising CEO pay, will change the employment landscape once they enter the decision-making level of the workforce.
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