This morning Citigroup Inc. (NYSE: C) CEO Chuck Prince declared that he would fire 73% more people than he had announced last month. If you ask me for the reason, I'd say so that he can finance a $600 million pay package for a new hire.
Citigroup's biggest problem is that its costs have been growing faster than its revenues, 23% and 15% respectively. The solution, announced last month, was to fire 15,000 people. But according to The New York Times today, Citigroup plans to bring that total to 8% of its workforce, or 26,000.
Meanwhile, Prince has reportedly been in talks to acquire a hedge fund, Old Lane, for $600 million. The idea is that former Morgan Stanley (NYSE: MS) executive Vikram Pandit, who runs Old Lane, would come along for the ride and join Citigroup as head of its Alternative Assets unit.
I am wondering whether Citigroup can find a less expensive way to hire talent -- maybe developing its own managers. In pre-market, Citigroup is up a mere 7 cents -- not much of a market reward for all that additional blood.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns shares of Citigroup and has no financial interest in Morgan Stanley.
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