The Charles Schwab Corp. today sent an email to its employees announcing more job cuts, bringing the total staff reduction to approximately 25% by the end of the year. A mistaken estimate of the duration of the prevailing economic downturn resulted in inadequate reductions earlier this year.
"In general, over the course of this summer, we have continued to be surprised by the depth of investor reluctance to reenter the market and I dont think were alone in that, nor are we alone in the impact that is has. It is clear that investor sentiment continues to remain depressed," said Glen Mathison, a spokesman.
The firm has announced its intention to eliminate 2,000 to 2,400 full-time equivalent positions by the end of October, amounting to the estimated layoff of 1,600 to 1,900 full-time employees and 200 contractors. The figures assume voluntary attrition of 200 to 300 employees through the end of the year. Schwab will offer the same severance package introduced earlier this year.
Schwab also plans to reap savings by vacating office space, decommissioning some systems, and further limiting advertising spending.
While the last restructuring involved cuts of 2,750 to 3,400 full-time-equivalent jobs, at the time Schwab estimated it would cost only $70 to $100 million and yield savings of $40 to $45 million per quarter. The current restructuring, which involves much fewer employees, is estimated to cost $225 million and will reap savings of $65 million per quarter.
"The best explanation I have is that its a different group of people and, as a result, there may be different costs associated with their severance," Mathison said. "There are increased severance costs associated with people who have more experience as well as people who may have an officer title or higher salary. Its not only salary but tenure."
"The only thing you can point your finger at is that the cuts are impacting a more highly-compensated employee," said Rich Repetto, e-finance analyst with New York investment banking firm Putnam Lovell Securities. While cuts earlier this year involved call center staff and other less-skilled employees, "this time, its cuts that are deeper," he said.
While Mathison declined to specify which business units will suffer the most cuts, he said "individual business units are given targets and there are different ways to achieve those targets. Clearly, one key way that theyre going to reach those targets is through headcount reductions. How they make those headcount reductions in terms of which specific employees is really up to them. Those decisions are in process."
