The new management had seemed to weather the scandal's aftermath on the basis of two impressive years during which the company returned to its roots in securities trading to great success. In 1992 Salomon posted $550 million in net income on $1.06 billion in pretax earnings, and in 1993 $827 million on $1.47 billion in pretax earnings. The 1994 results--a $399 million net loss on a pretax loss of $831 million--however, pointed to several weaknesses at Salomon and pressure from an increasingly competitive market. Business Week contended that Salomon suffered from weak management at the hands of Maughan, who had never been a trader. Key personnel left Salomon because of a new compensation plan implemented in 1993 that cut traders' bonuses for the benefit of shareholders. Perhaps most importantly, Salomon management had failed to define a clear vision for the company's future. As a result, industry observers, who predicted a mid-1990s shakeout on Wall Street based on an overabundance of traders and underwriters, speculated that Salomon would need to remake itself again in order to survive another crisis--the possibilities included an emphasis on investment banking, a return to a primarily fixed-income trading orientation, or a merger with or acquisition by a commercial bank. It seemed unlikely that Salomon would ever return to its position near the top of Wall Street that it held during the 1980s.
The new management had seemed to weather the scandal's aftermath on the basis of two impressive years during which the company returned to its roots in securities trading to great success. In 1992 Salomon posted $550 million in net income on $1.06 billion in pretax earnings, and in 1993 $827 million on $1.47 billion in pretax earnings. The 1994 results--a $399 million net loss on a pretax loss of $831 million--however, pointed to several weaknesses at Salomon and pressure from an increasingly competitive market. Business Week contended that Salomon suffered from weak management at the hands of Maughan, who had never been a trader. Key personnel left Salomon because of a new compensation plan implemented in 1993 that cut traders' bonuses for the benefit of shareholders. Perhaps most importantly, Salomon management had failed to define a clear vision for the company's future. As a result, industry observers, who predicted a mid-1990s shakeout on Wall Street based on an overabundance of traders and underwriters, speculated that Salomon would need to remake itself again in order to survive another crisis--the possibilities included an emphasis on investment banking, a return to a primarily fixed-income trading orientation, or a merger with or acquisition by a commercial bank. It seemed unlikely that Salomon would ever return to its position near the top of Wall Street that it held during the 1980s.
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