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Barclays Under Fire for Firing 15 Bankers and Cancelling Bonuses Just Before Holidays
Team Finance Saathi
28/Dec/2024
What's Covered in the Article:
- Barclays terminated 15 bankers and traders, cancelling their year-end bonuses, sparking outrage.
- Legal action is being considered by fired employees, with claims potentially exceeding $10 million.
- Barclays defends the layoffs as part of a long-term strategy to streamline operations, despite industry criticism.
In a controversial move just before the holiday season, Barclays has fired 15 New York-based bankers and traders, along with 35 other employees, without issuing their annual bonuses. This decision has sparked significant backlash, as the bonuses are typically a crucial part of the total compensation for investment professionals. For the affected Wall Street professionals, the layoffs erased potential bonuses that could have reached up to $1 million, according to industry sources.
Investment bankers typically earn salaries starting at $200,000, with bonuses making up a substantial portion of their compensation. Barclays’ decision not to offer any bonus payments, even partial or pro-rata ones, has been met with strong criticism. Attorney Tanvir Rahman described the action as "heartless," pointing out that other firms, including Goldman Sachs and Bank of America, typically provide partial bonuses to employees who are let go late in the year.
Potential Legal Action
Several of the dismissed employees are contemplating lawsuits, with claims potentially exceeding $10 million. They argue that bonuses earned throughout the year are not entirely discretionary and should still be paid out. Attorney Rahman pointed out, however, that employment contracts typically stipulate that only current employees are eligible for bonuses, which may limit the chances of legal success. Some ex-employees are exploring arbitration through the Financial Industry Regulatory Authority (FINRA) to resolve the disputes.
In response to the criticism, a Barclays spokesperson stated, “We regularly review our talent pool to ensure that we are investing in talent, delivering for clients, and best positioned for long-term success.” These layoffs form part of a broader three-year strategy aimed at reducing the bank’s reliance on investment banking and streamlining its operations, the spokesperson added.
Bonus Cuts in Recent Years
This move comes despite reports that bonuses in certain departments, particularly those tied to dealmaking activity, were expected to see an increase of up to 20% due to a recovery in the market. Barclays has been tightening its bonus payouts in recent years, cutting overall bonus payouts by 43% in 2023 as revenue dropped. In 2022, many bankers reportedly went without bonuses altogether.
Impact on Morale and Industry Sentiment
The decision to fire employees and cancel bonuses has fueled resentment among both the affected workers and the broader Wall Street community. The incident highlights the delicate balance financial institutions must maintain between cost-cutting measures and employee morale. As legal battles loom, this case serves as a reminder of the challenges faced by financial institutions in managing their workforce and maintaining industry relationships during times of economic uncertainty.