Mack the Knife has struck again.
Doing what he does best, John Mack is planning to cut about 1,000 jobs in
big brokerage operation. The bloodletting is the first significant move by Mack to reshape Morgan Stanley since he was named chairman and chief executive of the Wall Street firm four weeks ago.
The job cuts, which represent about 10% of Morgan Stanley's army of brokers, were announced in an internal memo from the firm's acting president, Zoe Cruz.
The cuts are part of an effort by Mack to boost the profitability of the firm's brokerage operation, which, despite its considerable size, lags behind
"As we do throughout the firm, we must constantly review the performance of individuals in the retail group and identify those who are not up to our standards,'' said Cruz in the memo. "As we move towards our new goals, we anticipate reducing the number of brokers by about 10%."
To some extent the job cuts are not surprising, given Mack's reputation for aggressive cost-cutting. Over a three-year stretch at
Credit Suisse First Boston
, Mack eliminated nearly 10,000 jobs. While his ax-wielding helped return CSFB to profitability, he also clashed with other top managers at Credit Suisse, the Swiss bank that owns the investment firm.
Mack's internal clashes at CSFB led to his departure from the firm last summer and paved the way for him to make his triumphant return to Morgan Stanley.
Mack, who was driven out of Morgan Stanley after losing out in power struggle with Philip Purcell, returned to the firm after Purcell was ousted himself.
Given that Mack comes from the investment-banking side of Morgan Stanley, the job cuts in the brokerage group could ignite more bad feelings at the firm. In turning to Mack, the firm's board had hoped to quiet some of the internal and external dissension that prompted Purcell's sudden resignation.
Purcell was driven out of the firm mainly by opposition from former and current investment bankers.
In the memo, Cruz also outlined a plan to reduce the firm's progam for training new brokers and put more emphasis on hiring experienced brokers. Next year, the number of brokers in training will be cut from 2,600 to 1,000.
"These measures will allow us to continue advancing toward our objectives of improving margins and profitability, even as we look for a new leader for IIG who can help take a valuable business to the next level of success,'' Cruz said.