Future tense for Merrill, Lehman employees
On Monday, as the news of collapse of Lehman Brothers and takeover of Merrill Lynch trickled into India, top company officials tried in vain to pacify its worried employees.Updated: Sep 15, 2008, 21:58 IST
On Monday, as the news of collapse of Lehman Brothers and takeover of Merrill Lynch trickled into India, top company officials tried in vain to pacify its worried employees.
At 1.30 pm sharp, Merrill Lynch managing director for offshore development Harmeen Mehta told its employees in an assuring tone; “Do not panic. Bank of America has found Merrill Lynch as a better option.” Mehta could be trying to soft-pedal a burning issue, but the fate of hundreds of Merrill Lynch employees in India will be decided in the crucial meeting scheduled tomorrow in Hong Kong.
Even as Merrill Lynch is trying to grapple with its problems, Lehman Brothers, which had hired employees paying the exorbitant salaries, could now become the poaching ground for its competitors. The industry grapevine is that several of Lehman employees have been asked to work from home until further directions.The immediate fallout of the Wall Street bank’s collapse could be an exodus of talent from it. Sources said that big corporate houses have already given offers to Lehman employees.
“Though their salaries are very high, the situation may force them to join a stable domestic financial firm with a substantial cut in their salaries,” according to the CEO of a domestic financial giant.
For a person with 6-7 years experience in the investment banking space, Lehman was paying as high as Rs 50 lakh per annum excluding bonuses. If Lehman manages to retain its employees, it will be with a major cut in salaries and bonuses. Some top-level Lehman employees have already started moving out in anticipation of a global-level lay off.
For instance, Samita Shah, a top-level employee has recently quit Lehman and joined Credit Suisse Investment Bank. Samita was one of the early catches for Lehman when it started India operations.
Lehman has around 1,700 employees in India and Merrill has 600. Lehman Brothers had shutdown its mortgage capital division that employed around 150 employees earlier this year.
With the ills of a major global slowdown getting more pronounced, Merrill Lynch too had recently laid off around 50 people in India. Now, with this takeover, more could lose jobs, as the resultant bigger entity may to further downsize the headcount for economies of scale.
However, there are no major overlaps in the business models of Bank of America (retail-focussed) and Merrill Lynch, which could work in favour of the existing employees. Only corporate lending and fixed income businesses are the two overlapping areas.
“The move is highly beneficial for Merrill Lynch since it marks the marriage of two financial giants,” said an official close to Merrill Lynch.