Goldman will cut around three percent of its work force in response to its poor performance in the second quarter.
David Viniar, The firm's chief financial officer, announced the cuts on a conference call with analysts that followed the release of the terrible quarterly results.
In times past, Goldman may have had enough flexibility to avoid such deep job cuts. Instead of layoffs, the firm could slash bonuses.
But reforms made in the aftermath of the financial crisis have made compensation less flexible. Goldman employees have dramatically higher base salaries and are paid smaller bonuses now. That means when revenues fall, the firm has no choice but to hand out pink slips.
Viniar said the cuts will include both senior and junior people. Part of the reason for this is symbolic: Goldman needs to show investors—who are deeply disappointed at this latest stumble—that it takes their interests seriously. And cutting some senior jobs may convey that message.
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