MUCH has been written about the job cuts at DBS Group Holdings and the ensuing public debate over the wisdom of such a move.
While I don’t intend to add to the debate, I must say that even I'm taken aback by the bank’s latest move – a frank admission to Reuters yesterday that “all DBS employees and especially the senior managers will experience pay cuts in the form of significantly reduced bonuses”.
It is probably management’s way of saying that they will feel the pain along the rest of their staff - especially for those that have been axed.
But traders sure didn’t read it that way when they reacted to the Reuters story when it came out around mid-day yesterday. Some of them complained that it smacked of a profit warning since the other two banks have kept mum about their staff bonuses.
They blamed the Reuters story for the slump in DBS' share price - as it swung from a gain of 39 cents in the morning to a loss of 39 cents in the afternoon - despite a regionwide rally in banking stocks following Citigroup's bailout by the US government.
It also makes me wonder if this is the cause for the weakness in DBS shares today. As I write (3.50 pm), DBS is down 10 cents at $9.10. In contrast, United Overseas Bank has risen 54 cents to $12.44 and OCBC is flat at $4.78.
Of course, it is good corporate governance to be as transparent as possible to the investing public.
But as I noted in the “Bulls and Bears” report published on Monday, while it may be necessary to trim unnecessary costs during a business downturn, it would be wise to execute them quietly and without fanfare, given the crisis of confidence that now abounds in our financial markets.
Take job cuts for example. While management regards them as a prudent cost-cutting measure to strengthen the balance sheet, investors may view them as a sign of panic – that matters are taking a turn for the worse.
Given the contradictions of views, the less said and written about the issue, the better.
It is that time of the business cycle when silence is golden.