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Bear Stearn has been bought out - but what about its employees?
By Lauren | March 19, 2008
Well, it’s been an interesting week in the business world, and it’s only Wednesday morning. Remember when Bear Stearn’s Chief Executive Alan Schwartz went on record last week to tell investors that his company was doing just fine despite the subprime mortgage mess? Mere days later, we learned that Bear Stearn was being sold out to rival JP Morgan Chase, one of the few banks that seems to be coming out of the subprime mortgage market collapse in pretty good shape. And not only is Bear Stearn being sold, it’s going for a fire sale price of a mere $2 per share, or about $236 million and change. That’s a bargain – Bear Stearn’s midtown Manhattan headquarters alone has been valued at over $1 billion, a tidy sum that may help JP Morgan Chase cover Bear Stearn’s massive losses.
Wall Street seemed happy with the deal – JP Morgan Chase’s stock price jumped 10% at the news. The Federal Reserve then cut its lending rate to banks by .75%, and created another lending facility for investment banks, presumably to stave off more spectacular crashes like the one Bear Stearn just took. Stocks have rebounded (some), threats of recession have been pushed off for another day (maybe), and all’s right with the world, right?
Well, maybe not.
Before it toppled, Bear Stearn had about 14,000 employees, and it appears that no one is making any special accomodations for them. Every last one of those people was working for a reason and, for most of them, working probably had a lot more to do with making a living than it did with making a killing on Wall Street. (This isn’t the first time we’ve seen employees hurt by management’s irresponsible high rolling: remember the Enron employees who lost their retirement savings on worthless stock options that they were encouraged by their bosses to buy?)
A good friend of mine who works as an investment professional observed that the banks who got embroiled in the subprime mortgage mess were “stretching for yield” to satisfy investors who stridently demanded ever-higher yields on their investments. That phrase reminded me of a rubber band being stretched to the point where it snaps back viciously enough to leave bruises. I recognize that CEOs have an obligation to generate acceptable profits for the shareholders who own their companies, but I also think it’s unethical for CEOs to stretch so far to get those profits that they forget the people who keep their companies running. When the rubber band snaps back, it shouldn’t injure the people who can least afford the pain.
Topics: Business Ethics, corporate responsibility |
March 20th, 2008 at 3:31 pm
Its 14,000 employees not 140,000
March 20th, 2008 at 8:29 pm
Hi Robert,
Thanks for the correction! As you can see, I made the change.
That 140,000 number came from a news report - it seemed high to me, but I accepted it on faith without further checking. Just goes to show how mistakes can proliferate! Thanks again for pointing it out.