As you may have heard, bonus season this year is going to be a bit tricky, on account of the fact that Wall Street banks didn’t make much in the way of cash in 2011. While paying some seniors staff zero dollars is being considered, it still may not be enough to pick up the slack. There is one idea that’s been floated among firms but shot down, so far, for fear of being too risky, so risky that it’s probably not even safe to mention it here but I’m gonna– freezing pay for junior staff. (Oh god, shhh, don’t say it aloud, we don’t want to start a run on the banks!) Everyone wants to do it but no one’s got the cojones, fearing the backlash that would come from angering “future stars” whose names will be learned in 5-7 years when they graduate from second class citizen status. No, the consequences would be dire. Unless…unless everyone put up a united front against these incredibly powerful and intimidating people?
Wall Street’s biggest firms, facing a slump in investment-banking revenue, are considering freezing compensation levels for some junior bankers, according to people familiar with the deliberations. Credit Suisse is likely to suspend its practice, an industry norm, of boosting pay automatically each year for analysts, associates and vice presidents within the investment- banking division, a person with direct knowledge of the decision said. While those employees will get their regular annual salary increases, bonuses probably will be lowered to keep total pay flat from a year earlier, said the person, who requested anonymity because the plan isn’t public. Goldman Sachs and JP Morgan are being watched by competitors for signs the companies are planning similar moves, said people at four other firms. Cutting pay can be perilous if your rivals don’t because it’s easier for junior bankers to defect, draining a future generation of talent. Wall Street firms may make the change en masse only if one or more of their biggest rivals act first, the people said. “There’s always the risk that people may go across the street for a better deal,” said Joseph Sorrentino, a managing director in New Yorkat Steven Hall & Partners, an executive- compensation consultancy. Among junior bankers “you have some potential future stars and you want to make sure you keep them engaged and keep them happy and performing.” JPMorgan, which doesn’t plan to alter its practices, may change course if other firms do so, a person briefed on its decisions said.
If anyone wants to talk about this further, meet in the alley behind 200 West around 9 o’clock and tell no one. You don’t want to know what happened to the last c-level executives to cross a first-year analyst, let alone a whole army of them.
Wall Street Mulls Partial Pay Freeze [Bloomberg]