Large-scale layoffs seem all but certain in the months ahead for Great Western Financial Corp., which is currently the subject of two competing takeover bids from rival suitors Washington Mutual Inc. and H.F. Ahmanson & Co.
But despite the potential for major job reductions, Great Western continues to hire new employees and will keep doing so when “critical positions” become open, said a company spokeswoman.
That practice could prove costly to the suitor that eventually acquires Great Western and especially to Ahmanson since Great Western adopted a lucrative severance package for all employees shortly after Ahmanson’s initial takeover bid in February.
Under the current package, all full-time Great Western employees regardless of their length of service will receive a minimum six months’ severance pay if they are laid off. High-level employees fare even better, with senior vice presidents receiving a minimum of two years pay and first vice presidents receiving a year and a half.
Thus, senior vice presidents such as David Imig and Lawrence Spera, who were both hired by Great Western within the last three months, will each receive the full two years’ severance if they are laid off after a merger.
The continued hiring comes as something of a snub to Ahmanson, which had advised Great Western to institute a hiring freeze in order to minimize the magnitude of layoffs if the two institutions end up merging.
Furthermore, Ahmanson would likely be hit harder than Washington Mutual would by the recent new hires in the event of a successful acquisition of Great Western.
That’s because Ahmanson unlike Washington Mutual has considerable overlap with Great Western’s service area, which would translate to more job redundancies and, thus, necessitate more layoffs.
Ahmanson, through a direct solicitation of Great Western shareholders, had been pressing to force Great Western to hold its annual shareholders meeting by May 6. However, as of late last week, Ahmanson appeared not to have received the requisite majority of votes to force the meeting. Great Western has scheduled the meeting for June 13.
Some analysts defended the continued hiring, saying that Great Western must keep filling key spots and conduct its business as usual in the run-up to an eventual acquisition.
“The fact is, they continue to expand their business and need to fill those positions,” said Joe Morford, an analyst with Alex. Brown & Sons.
Morford agreed that Ahmanson could be forced to eliminate more of the new positions than Washington Mutual if its bid is successful because of the higher overlap issue.
“But it’s hard to say that Great Western is maliciously hiring people as an attempt to add to Ahmanson’s expense,” he added.
Ahmanson spokeswoman Samantha Davies was less supportive.
“We really think that instituting a hiring restriction is in the best interest of the Great Western employees,” said Davies. “We’ve done it on our end. We think it will ensure there will be more spots available for them and less pain felt (in the way of layoffs after a merger).”
Since Ahmanson launched its takeover bid in February, Great Western has hired “fewer than 10” people at the first vice president level or higher, according to Great Western spokeswoman Laura Snow. She declined to be more specific, and refused to disclose how many lower-level hires have been brought on. In an earlier conversation, Snow said she believed it to be in the dozens.
“We’re operating under the premise of ‘business better than usual’, and that means we need to hire critical people in order to get jobs done,” Snow said.
Recruitment specialists also defended Great Western’s severance package, saying that the generous severances are vital to attract candidates for Great Western jobs, which are seen as highly tenuous by the general job market.
“We’ve placed three or four people with (Great Western) since the merger announcement at the vice president level or higher, and it wasn’t easy,” said Carl Miller, executive vice president at Russell Stephens Inc., an executive placement firm that specializes in recruitment for financial institutions.
“The only way (for Great Western) to recruit people without providing astronomical salaries is to offer the lucrative severance package.”
Miller added that Russell Stephens’ hiring assignments from Great Western have gone up since the Ahmanson offer was unveiled in February, approximately doubling compared with year-ago levels.
“It’s a sinking ship, so more people are leaving,” he said.
Meanwhile, Snow denied that overall hiring is up at Great Western, adding that the thrift is only bringing on new people when an empty position is considered “critical.”