Kidder moves to retain key staff

NEW YORK - General Electric of the US, fearing defections of key staff from its Kidder Peabody securities subsidiary, plans to award brokers and senior managers year-end bonuses in the form of restricted share options, writes Larry Black.

The options, which are in addition to existing cash bonuses, will give the executives a strong financial incentive to stay with the troubled Wall Street firm, which GE is reportedly preparing for sale.

The parent company, which has confirmed it is talking with Paine Webber Group about merging the firms, announced a sweeping restructuring of Kidder last week. It will make redundant 550 employees, about 10 per cent of its workforce, and cut its assets by almost half.

Kidder has been cutting its securities inventory since early this year, when it revealed that it had fired its chief government bond trader, Joseph Jett, accusing him of booking dollars 350m in non-existent trading profits.

Last Thursday, Kidder announced that its portfolio of collateralised mortgage obligations - worth about dollars 6.7bn - would shift from its books to those of a stronger GE subsidiary, General Electric Capital.

The transfer of those assets considerably reduces the firm's gearing, making it 'far more digestible for a potential buyer or merger partner', one analyst said yesterday.

The restricted options give Kidder employees the right to buy highly valued GE shares at a favourable price three to five years from now.