Securities management faces new demands, bigger risks
John Chalsty recalls being appalled at what he found when he joined Donaldson, Lufkin & Jenrette Inc. as an oil analyst in 1969. The lack of attention to the management process, he thought, made the business ``a sort of cottage industry.'' But later, when he had become more humble, in his words, Mr. Chalsty realized that the company's management differed from the rest of corporate America. The securities business was structured in a way that allowed it to be part of the last successful flowering of the classic partnership.
Almost 20 years later, the amount of capital raised by the securities industry has hit hundreds of billions of dollars, profitability has skyrocketed, Wall Street has attracted thousands of employees as companies expanded, and a five-year bull run symbolized unlimited opportunities. Traders also started working through 24-hour trading days, signaling that globalization of the markets could not be ignored.
But when the stock market fell last October, firms let people go in droves and eliminated departments. Congress turned its attention to the markets, regulations, and investigations. This came on top of the insider-trading scandals.
Chalsty, president and chief executive officer of Donaldson Lufkin, and other industry officials spoke last week on the trends and demands on the industry's management at a conference sponsored by the Securities Industry Association.
``Many of the challenges we are facing today are a result of the rapid expansion of business which burst upon us due to the expansion from 1982 to 1987,'' noted Edward I. O'Brien, SIA's president.
Since the stock market plunge, roughly 12,000 people have been laid off, with more expected, particularly if market conditions do not improve. Last week the Dow Jones industrial average closed up 54.71 points to 1,958.22.
In another measure of layoffs, a survey by Arthur Andersen & Co. and the SIA, released last week, found that 15,400 workers in full-line securities firms and large investment banks were laid off from June 1987 through last month.
SIA member firms, for example, had added 100,000 jobs to the securities industry since 1982, while the United States Department of Labor found that the whole industry added 160,000 jobs.