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Reasons why $10m bonuses are about to make a comeback
16 June 2009By Sarah Butcher
COMMENTS
500 times what a normal, hard-working decent person earns, for gambling? Tossing a coin or dice? Where is the justice? What on earth can you do with all that money? Read all comments »We pointed out some time ago that big bonuses will probably make a comeback in 2009. Now Breaking Views offers another perspective on why we're about to see the return of the eight figure payout.
The article is for subscribers only, so a heavily summarised version follows in bullet points below.
The third point is the most interesting - the populace may well cry foul at the resurgence of the mega-bonus, but new pay structures should appease their indignation. The trick this year will therefore be to devise a pay structure which appears outwardly punitive, but in reality isn't at all (Credit Suisse's toxic asset scheme?).
• Banks earned huge amounts trading debt in the first quarter. This looks set to continue. Goldman is on track to match the revenues it made in 2006.
• Banks are paying back TARP and escaping related pay shackles.
• By pointing out that they're spreading payments over several years and adding clawback clauses, organisations will be able to make $10m payouts seem more acceptable.
COMMENTS
Accountant, Accounting & Finance, Tue 16 Jun 09
500 times what a normal, hard-working decent person earns, for gambling? Tossing a coin or dice? Where is the justice? What on earth can you do with all that money?
Add your comment »Mr. Frank White, Quantitative Analytics, Tue 16 Jun 09
Accountant, what's your beef?
Add your comment »Accountant, Accounting & Finance, Tue 16 Jun 09
My "beef" is that I earn £28k as an accountancy trainee, and mates I went to uni with not any better than me who chose sales/trading are earning 6 figures already age 22-23, and not through working harder, nothing like that.
Add your comment »Banker, Investment Banking / M & A, Tue 16 Jun 09
Accountant - life's a b**ch, ain't it? My advice: deal with it.
You chose your profession and they chose theirs. Accept it and move on. Your whining just makes me pity you. Furthermore, I don't believe you're the judge and jury with regards to who works "harder" so the prudent thing to do is to refrain from such judgements. Plenty of people in Sales & Trading work extremely hard. I don't think you're in the office at 7am every day!
jjj, Trading, Tue 16 Jun 09
yes, but:
A. you CHOSE to be an accountant
B. you can still change and make the no-brainer move to IB
C. not many 22-23 yr olds in IB make over £100k, believe me. Couple of reasons for this. Firstly, many banks have compensation caps in place for people prior to Associate (or equiv) promotion, i.e. 2-3y in the job. Chronologically therefore, this is mathematically impossible assuming they finished education at 21 (min). FEW people below Associate make six figures total comp, and those that do are in the v low 6 figs. Secondly, banks simply don't NEED to compensate MOST people as such at that stage of their career.
However after Associate promotion, the comp curve steepens; 3-4y in and £200k is good going. After 5-6y you should be making VP (or equiv), and at this point salary should be £70-90k and the bonus 250%+
Thereafter disparity in earnings can see very similar performers at in different roles / banks / geographies / asset classes earning vastly different sums, often with absolutely no rhyme or reason.
Very ballpark figures, with obvious exceptions.
Young, Rich & Pretty, FX & Money Markets, Wed 17 Jun 09
jjj, your numbers are way off, either you're not a top-tier performer or at a bank which doesn't pay properly. Indeed there are normally bonus caps as a 1st yr analyst of £50-60k, thereafter profitable 2nd yr analysts easily go over £100k. Then as an Associate it spirals - 1st Yr Assocs can get £200k if they're good, 2nd Yr £250k. Then VP, £250k+ as a 1st yr VP easily.
Add your comment »James, Asset Management, Wed 17 Jun 09
After reading a few of these articles regarding the comp of bankers I would be interested to know the number of people there is in the city earning 300k+? Are we talking hundreds, thousands, 10's of thousands?
Add your comment »Young, Rich & Pretty, Trading, Wed 17 Jun 09
James, pretty much every 2004 grad I know is earning over £300k - we're all 1st/2nd yr VPs age 25-26. Easily 50,000 earning over £300k, probably more.
Add your comment »ABSTrader, Derivatives, Wed 17 Jun 09
jjj is the first person in a long time on this site who has given an accurate picture of the remuneration trajectory for junior investment bankers (IBD). Young, Rich & Pretty you are probably only describing the salary profile for people exclusively in sales and trading at very profitable desks with a Tier 1 Investment Bank, and probably then only in bull market years leading up to 2008, or are you Henry in disguise?
Add your comment »Danny, Debt / Fixed Income, Wed 17 Jun 09
How about support people like Comms, Risk, Compliance? What do they earn? Any idea Sarah or others?
Add your comment »