Horror in Yeouido

Recent volatility in the stock market has employees at brokerage houses staring at an unsure future as their companies dramatically cut payrolls in the face of further economic uncertainties. (Photo : The Korea Times/Ryu Hyo-jin)

Brokerage houses in firing spree as business sours

Brokerage houses are dramatically laying-off employees, as the bad economy continues to squeeze finances. Workers are obviously angry and so are customers, who question how the companies can attempt to promote optimism and encourage people to buy shares while corporate management in the industry is repeatedly hitting the panic button.

In the first quarter of this year, many securities firms released positive reports that predicted the market would soon revive. One said it would be like “a clear sky after a storm moves on” and encouraged investors to increase their portion of stock investment.

Another at the end of last year predicted that the expected rate for returns would be 30.6 percent in 2012, emphasizing that share prices would be more likely to go up than go down.

But the firms that released the reports laid off a considerable number of employees shortly after announcing these rosy expectations.

The number of staff at 63 brokerage houses dropped to 42,388 in the first quarter, down from 42,683 at the end of last year, according to the financial authorities.

It is only a 0.7 percent deduction, but the layoffs are very rare because it is the first time such action has been taken since the second quarter of 2009, following the 2008-2009 global financial crisis.

The number of redundancies for the January-March period is 78 at Tongyang Securities, 69 at Mirae Asset Securities, 31 at Samsung Securities and 25 at Hyundai Securities.

The job reduction rates at such major firms stands at about 2 percent, but small-sized companies have seen higher rates ― 10.2 percent at Yuhwa Securities, which has dismissed 10 of its 98 employees, 7.2 percent at Hanyang Securities, 6.4 at Leading Investment and Securities and 3.7 percent at IBK Securities.

Civic groups strongly criticized the contradictory reactions of securities firms, arguing that they are deceiving consumers.

“They are sweet talking people into making an investment, saying the market will get better in order to earn trading commissions even though they are now taking steps for restructuring because they believe that the market will be stagnant in terms of long-term prospects,” said Cho Yeon-haeng, vice-chairman of the Korea Finance Consumer Federation.

But companies have downplayed the scale of restructuring.

“Small-scale layoffs are nothing unusual in the industry,” an official from a securities firm said. “We focused on external growth in the past few years by hiring more employees but now we are trying to trim down the size amid sluggish market sentiments.”

But he emphasized that this has little to do with the positive predictions on the market. “The layoffs are by management and a market report is compiled by analysts. They are totally different things,” he said.

But workers at securities firms also voiced their concerns over the restructuring as the companies have mostly laid off contracted staff while slightly increasing positions at executive levels.

The number of permanent employees at the 63 securities firms decreased slightly by 0.2 percent to 34,282 in the first quarter from 34,338 at the end of last year. But the number of contracted employees dropped 3.1 percent to 7,916 from 8,166 in the same period.

Meanwhile, the number of executives such as board members and auditors increased to 1,085 from 1,023.

“A lot of employees have lost their jobs because securities firms have closed or integrated branches as part of risk management,” an official from the Korea Financial Industry Union said. “And more people will lose their jobs if the companies become actively engaged in mergers and acquisitions.” <The Korea Times/Kim Tae-jong>

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