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17,000 Pink Slips

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Call me old-fashioned. Call me a bleeding heart. Call me a babe in the financial woods.

But whatever you call me, you’re not going to quell the outrage I feel when I hear something like Citigroup’s announcement that it was going to get rid of 17,000 workers, or some 5.2% of its worldwide workforce of 327,000. However expertly you try to justify it, the thing stinks.

Essentially, 17,000 people are going to get the ax so that one person–in this case Citigroup CEO Charles Prince–can keep his job (at least for a little while longer).

Yeah, I know all the reasons that “investors” have been pressuring Prince to make such a move.

(As an aside, if this Prince finds that things get even more uncomfortable for him and decides that he needs more cover, maybe he should do what the singer Prince did for a while and change his name to a symbol that nobody can pronounce. It certainly brought a degree of (wanted or unwanted) anonymity to the Purple Rain crooner.)

But I digress. Getting back to the pressure from “investors.” The litany is so familiar at this point that one could recite it by rote. The corporation is bloated; the corporation has lost focus; the corporation’s expenses are rising too fast.

But the one that’s at the root of it and the one that all “investors” bring up first of all is that the price of the stock hasn’t kept up with that of the company’s competitors and/or the market in general.

Now let’s put things in a little perspective here. Citigroup used to be run by Sandy Weill, a legend who had a grand old time doing mergers and making acquisitions. Sometimes they worked and sometimes they didn’t. In fact, a lot of times they didn’t. But this didn’t prevent Mr. Weill from getting an outrageous salary, bonus, stock options and other perks.

Hey, you win a few, you lose a few.

Unfortunately, this kind of sublime resignation so frequent on the M&A landscape is not available to most of Citi’s rank and file, many of whom, I daresay, will be among those 17,000 who will no longer be part of the Citi family.

Other than its lagging stock price, Citigroup is a money machine. Net income in 2006 was $21.54 billion. True, this was down 12% from $24.59 billion in 2005, but still a bewilderingly huge amount of income.

But it’s a jungle out there among the megabanks, and that 12% decline in net income while competitors were increasing theirs is the ultimate no-no. And so, those 17,000 had to go.

The irony of all this is that the market barely acknowledged Citi’s announcement. Well, actually it did, in the sense that the stock went down after the cuts were announced rather than up. In fact some commentators were saying the cuts might actually hurt the company more than help it. Seems the “investors” weren’t happy.

It leads you to wonder whether it wouldn’t be simpler to just get rid of the one man who can’t seem to make it work than these 17,000 who presumably have been doing more than just sitting around fantasizing that the paper airplanes they were making were actually corporate jets.

But Prince still sits on the Citi throne. It seems the “investors” haven’t given up on him yet. You’ll know when they do, however, and at that point you can show up and help him carry his severance to the waiting limo.

Yes, I’m outraged by how blas? we’ve become about situations like this. And if the thought of 17,000 people losing their jobs at one fell swoop doesn’t make you dizzy, then here’s my diagnosis: You’re an “investor” and you’ve lost touch with reality.

Steve Piontek



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