Morgan Stanley Invests Up To $1.9 Billion in New Hires–After Laying Off 4,800 People

From the Financial Times:

Morgan Stanley plans to use up to $1bn saved from cutting 4,800 jobs this year to hire top-level executives and bolster its presence in areas such as derivatives, risk management and proprietary trading.

Morgan Stanley estimates it saved $1bn from this year’s compensation bill by cutting about 10 per cent of its workforce, particularly in areas such as investment banking, fixed income and research, in two waves of lay-offs in January and April.

People close to the company said it had already reinvested $400m of the savings in the salaries and bonuses of new staff. They added that Morgan Stanley could use the remaining $600m before the end of the year to lure other recruits but only if it found enough good candidates.

In other words, Morgan Stanley finds certain branches less profitable, lays off the people associated with those branches, then uses the money saved to give new execs some serious incentive for joining their ranks. Seems the people get pushed around as fast as the money in the finance industry.

The real question is this: What kinds of results do execs yield to make them worth their multi-million dollar salaries? Would it be as effective, in Morgan Stanley’s case, to retrain workers rather than firing and hiring new executives?