Schwab Plans Sweeping Cost-Cutting, Including Unpaid Leave for Workers
By CHARLES GASPARINO
Staff Reporter of THE WALL STREET JOURNAL
Charles Schwab Corp., the nation's largest discount brokerage firm, is implementing a series of drastic cost reductions, including telling people not to show up for work in the coming weeks, the company confirmed.
The move will affect all but the most essential employees -- such as telephone representatives who deal with small investors -- and will begin sometime in February, the company said. As many as 15,000 Schwab employees could be affected, people close to the company said.
"We are asking full-time and part-time domestic employees to take time off," said Daniel Hubbard, a Schwab spokesman. "They will not be paid unless they choose to take them as vacation time."
Mr. Hubbard said the move will not affect employees who have "client or critical business support positions," such as co-chief executives Charles Schwab and David Pottruck, and representatives who deal with the firm's bread-and-butter online trading business.
All branch offices that deal with small investors will remain open, as well as the firm's 24-hour Web service, Mr. Hubbard said. But other offices that employ marketing executives and administrative support staff could be shuttered during those days, according to people close to the company. It's unclear how many employees will be working in the firm's San Francisco headquarters, these people said.
The moves come on the heels a sharp decline in revenues at a number of financial firms, spurred in large part by the decline in trading by individual investors. Schwab, for its part, has been hit particularly hard hit by the downturn; Fourth-quarter earnings at the San Francisco-based firm fell 27%, slightly below expectations, as higher expenses and the falling stock market hurt the online and discount broker's bottom line.
While the firm is looking to avoid cutting its work force, it recently announced that salaries for the managers will be reduced for the months of January and February. The reductions range from 50% for company co-chief executives, Mr. Schwab and Mr. Pottruck, to 20% for the executive committee and executive vice presidents, 10% for senior vice presidents and 5% for all other officers.
It's unclear how much the latest cost-cuts will save the firm. Mr. Hubbard would only say that the moves would "help us achieve some significant savings."
People close to the company also said that the firm is looking to dramatically reduced its travel budget as well, another move to avoid layoffs that have taken place at some of Schwabs' full-service brokerage competitors, Merrill Lynch & Co., and Prudential Securities. One plan under consideration: Forcing employees to receive approval from executive vice presidents if they want to travel. The move would have the affect of ending all but the most essential travel-related expenses, said one person close to the company.
Mr. Hubbard had no comment on the travel reductions.
Schwab isn't the only brokerage firm to cut costs in a tougher market environment. Most brokerage firms, which enjoyed explosive growth while investors were infatuated with equities in recent years, are now reeling from the market's slide in 2000.
Ameritrade Holding Corp. laid off about 300 workers, or 12% of its work force, in early January. The layoffs affected customer service employees at the company's service centers in Texas and Omaha, Neb., where the firm is based.
Morgan OnLine, J.P. Morgan Chase & Co.'s ambitious private-banking site on the Web, also laid off about 150 employees in sales, marketing and other "client acquisition" roles.
In recent weeks, other firms such as Merrill Lynch, Bear Stearns Cos., Credit Suisse Group's Credit Suisse First Boston unit and Prudential Securities, a unit of Prudential Insurance Co. of America, each have announced dozens of job cuts and/or cost reductions as the stock market has sputtered.
Goldman Sachs Group Inc. and Morgan Stanley Dean Witter & Co. have also begun to rethink hiring plans and selectively reduce their work force amid the profit drought, people close to the firms have said.
Write to Charles Gasparino at charles.gasparino@wsj.com
------------ |
