Read Accounting Headline 9.8 and discuss how the HSBC will account for the job losses it creates. Do you think it is a limitation of financial accounting that HSBC can increase profits when such an increase is a result of negatively impacting a particular group of stakeholders? Explain your view.
Accounting Headline 9.8 An illustration of activities that concurrently increase profits and social costs' HSBC eyes thousands of additional job cuts PATRICK JENKINS London: HSBC is gearing up for thousands more job cuts, with Europe's biggest bank by market value set to outline the next stage in its strategic overhaul at an investor day in May. There is no fantastical new strategy out there,' said one person familiar with the bank's planning, but there's still huge potential to be more efficient.' Stuart Gulliver, HSBC's chief executive, said when he announced annual results last week that he would fixate on costs' over the coming year and promised to find a further $1 billion of annual savings in 2013. The job cuts target is still to be fixed but people close to the bank suggested up to 5000 staff could go as part of the savings plan. If HSBC maintained the recent rate of staff cuts to cost savings, the number would be closer to 10,000. Mr Gulliver, in charge since early 2011, has spent the past two years trying to streamline HSBC's global network of fiefdoms, both in order to impose more control from head office in London and to strip out overlaps and inefficiencies. The bank has already exceeded its target of finding $2.5 billion-$3.5 billion of cost savings by 2013, announcing $3.6 billion of 'sustainable annual savings' with its 2012 results. However, it remains as far as ever from a related targetto cut the bank's elevated cost-income ratio to between 48 per cent and 52 per cent. Last year the ratio, which measures overheads as a proportion of revenue, spiralled upwards to 62.8 per cent. The number was inflated by the one-off cost of paying a $1.9 billion fine to US regulators over money laundering and sanctions abuses. However, even with that payment stripped out, the cost-income ratio was still 56 per cent, as revenue numbers were held back by anaemic economic growth in much of the world. As part of Mr Gulliver's plans, the bank is expected to close or sell a further eight to 10 businesses this year and next, in addition to the 49 divested since 2011. The new job cuts will come on top of the sharp reduction of staff numbersfrom 302,000 to 260,000over the past two years. About 10,000 of the headcount reduction so far has been the result of divestments, with the rest due to cuts. But according to people involved in planning the investor day, the tally of cuts could be more dramatic still if Mr Gulliver pressed ahead with plans to dispense with HSBC's tradition of in-house software development. The number of staff in that area is estimated to have been trimmed from 27,000 to about 21,000 but more would go if the bank shifted to outsourcing. Bankers said the contraction was likely to be gradual and would be partly offset by the creation of new jobs as HSBC pushed into new technology areas such as mobile banking
