We’re all too familiar with the story of layoffs on Wall Street and a hiring slowdown is clearly undeway. But even those who find new jobs will likely be stung by the the downturn on Wall Street. Wall Street compensation packages for new hires are expected to decline by as much as 20 percent, according to a survey of leading recruiters released today.
“Recruiters are in virtually unanimous agreement that compensation for new Wall Street hires will decline, although there is some disagreement as to the extent of the downturn,” according to specialized research firm smart cube.
More than 40 percent of recruiters surveyed expect compensation will decline by as much as 20 percent, while 22 percent expect the decline to range between 11 to 16 percent, smart cube’s research shows. About one-fifth of the survey’s respondents were less pessimistic, predicting a decline of less than 10 percent.
London will also take a hit. In fact, recruiters there are even more pessimistic.
“In addition to imposing layoffs, investment banks will only recruit new employees in areas where there are critical openings that absolutely need to be filled. With Wall Street unemployment steadily rising, the job market pendulum has clearly shifted in favor of employers,” says Omer Abdullah, the smart cube managing director who oversaw the survey.
Compensation
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Compensation
Blowing Your Mind: Grossly Overpaid Bros Go To Bat For Equally Overcompensated Bro in Another Line Of Work
By Bess Levin
Thank god, the money managers have weighed in and decided: A-Rod was entirely justified in opting out of the final three seasons of his contract with the Yankees. According to Daniel Alpert, a partner at Westwood Capital, a boutique investment bank in New York that specializes in mortgage and related securities, “there’s nothing cold blooded about it.” And what’s Balestra Capital founder James L. Melcher’s take on the situation? “Not only do I have no problem with it, I’m cheering him.”
Can you imagine what would happen if these guys didn’t stick together? When you’re trying to rip people off, the moral support of your peers really counts for a lot. (Investors in) Absolute Capital know what we’re talking about.
Rodriguez Not Greedy by Standard of Wall St. [NYT]
Delving further into its favorite class war between the Haves and the Have-Mores this weekend, The New York Times found that in Silicon Valley, people who are rich don’t feel rich compared to their very rich neighbors. And they’ll try anything—even working a whopping twelve hours a day—to move into that next tax bracket. You know, the one that will make them feel a sense of superiority and self-worth and raison d’être. Just like us (you)!
Yes, many members of this “digital elite” feel bad about themselves because they are “surrounded by people with more wealth—often a lot more.” One gilded geek, Gary Kremen, pouts, “It’s just like Wall Street, where there are all these financial guys worth $7 million wondering what’s so special about them when there are all these guys worth in the hundreds of millions of dollars.” Reminds me of this story Keith likes to tell about sitting in the steam room of the 92nd Street Y with an inconsolable Daniel Seth Loeb, weeping over the fact that he made $150 million last year, sure, who cares about that when James Simons is spending that much on cigarettes annually?
But lest you think you and your West Coast brethren are too much alike, the Geek Squad makes sure to point out a notable difference: they feel bad about it. Sure, talent played a role in their good fortune, but so did “being at the right place at the right time” and many feel “sheepish, even at times guilty about their piles of cash.” See, they’re just as obsessed with money and chasing the top one-tenth of a percent (if squarely in the top one percent), or the top one-one-hundredth of one percent (if in the top one-tenth of one percent) as you, but in Silicon Valley, they’re introspective and self-doubting and have issues about their stacks of gold. Sometimes they even cry about it (when was the last time you shed some salty discharge over your bonus? And not the “I feel bad about my bonus because I got screwed out of three extra zeros so I’m going to silently weep about it in a little locked room” kind).
Which begs the question: Is it better to be a rich prick who questions his/her rich prickocity or a Dealbreaker reader? (I love you people, I do).
In Silicon Valley, Millionaires Who Don’t Feel Rich [NYT]
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Compensation
Do Zee French Have a Point or Is John Thain Just Grossly Overpaid?
By Bess LevinThere may be some tension in the NYSE Euronext cafeteria. Financial Times reports that Jean-François Théodore, the French John Thain (he’s like JT but wears a red smoking jacket and says ‘ménage à trois’ instead of ‘threesome’), i.e. chief executive of the Eurnoext, was paid less than a fifth of what Thain earned last year.
While Thain enjoyed a nice $9.36 million (€6.9m) paycheck, Théodore was awarded a measly €1.33m ($1.81m): barely enough to buy barely enough to buy a nice pair of frogs’ legs. Lest you chalk this up to an example of Americans working harder and taking less vacations (and paying for their health care) than Europeans, and being rewarded accordingly, note this: the Euronext was more profitable than the NYSE last year, with net profits of $504m versus a paltry $205m.
There’s a chance that Théodore will have an additional €200,000 thrown his way, following the Euronext’s shareholder meeting next week, if the board recommends that shareholders reward him for his “vital contribution” to the merger but at this point, we’d advise Theo (can we call him Théo?) not to accept anything less than $9.36 million (€6.9m). €200,000 is just insulting.
Théodore earns fraction of Thain at NYSE [FT via DealBook]
First: please continue to send us your projected bonuses. Second: not to bite the hand that feeds us, but where were you on this one, ladies? Bankers in Moscow making twice as much as their counterparts anywhere else? Including Goldman MDs? Industry recruiters tell Bloomberg that managing directors dealing with corporate mergers and stock/bond sales in Russia are earning $7 million plus a year, versus the 2-3 million that guys (and girls) doing the same work in New York are making.
Compensation rose 25% for bankers last year in Russia, on account of a 5-year oil boom, a record number of IPOs, and Russia’s place as the fastest growing major European economy. Goldman says it will double its Moscow staff to 70, Morgan Stanley to 100 (from 20). Interested in submitting an application? Securities firms are looking for “a combination of western experience and an understanding of the local conditions,” including but not limited to a vodka-specific alcohol problem. If you do make the move, there’ll be more than pogroms and long lines for bread in store for you.
Inside Moscow’s Garden Ring, bankers spend $7 million for a five-room apartment near the Bolshoi Theater, drop $350,000 for a Bentley at the car dealership next to Revolution Square, and rent private dining rooms at Turandot, a new $50 million two-story restaurant furnished in a late 18th century Marie Antoinette theme, complete with musicians in white wigs playing chamber music.
Who’s interested?
Moscow Bankers Get $7 Million Payday, Double New York Average [Bloomberg]
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Compensation
Ford CEO’s Compensation Not Necessarily Reflective of the Climate at Ford
By Bess Levin
Ford revealed today in its annual proxy that Chief Exec Alan Mulally was awarded a $7.5 million hiring bonus and $11 million to “offset” the compensation he lost for leaving Boeing last year. This is an interesting bit of news, considering that the automaker hemorrhaged $12.7 billion last year. The previous CEO, Bill Ford, did not receive a cash salary, bonus, or stock awards, since he had decided in 2005 to make himself a martyr “a commitment…to forgo any new remuneration until the company’s auto unit made sustained profits,” which might’ve seemed like more of a HUGE sacrifice if his family didn’t…own the company (or a sizeable amount of it).
Another way to look at this is that when you’re basically just putting money in paper bags and lighting it on fire, $28 million is just a drop in the bucket.
We’re also pretty sure Alan’s one of those guys with an “Act As If” attitude, since a friend of a friend of a friend told us recently that AM preemptively sent a note to the board of directors expounding on this philosophy. He allegedly went off on a tangent for some time about how “if you want to save this company, I’m going to need some serious clams. I’m talking dollars. Big money, hoooo! You think if I show up in public dressed like a hobo, it’ll convince people that they want to drive a Ford? No, if anything, it’ll bolster their decision to buy one of those, what’s the word, what’s the word, what’s the word—Monopoly cars—a KIA or something. Personally, I drive a Beemer; don’t take that the wrong way, no offense to the brand, but, like I said, I’ve got to act like we’re just rolling in the money, and if we’re getting naked and rolling around on piles of $1,000 bills, that’s got to mean something. Don’t take that the wrong way—that wasn’t an invitation from me asking you guys to get naked and roll around on piles of money with me, or a come on by any means, just an illustration. Anyway, the money—I’m going to need a lot of it. I’m also going to need you to send a few extra-plush robes over to my office for the price of—on the house. ASAP. We’re going to save this company, together. –A.”
Mulally gets $28 mln amid $12 bln Ford loss [Reuters]
Apparently Lloyd Blankfein wasn’t reading Dealbreaker the day we clearly laid out a bunch of alternative ways for the Masters of the Universe to spend their bonuses, back in January (the acquisition of hornymantee.com, 2 million Jim Cramer bobblehead dolls, an all-access pass to the Andrew Ross Sorkin Pleasure Palace, and so on and so forth). Radar reports that the old boy has purchased a $41 million home in Southhampton (which apparently retails for such a sizeable chunk of change because it comes with a name: “Old Trees”), on First Neck Lane.
Spread out on 10.6 acres, the estate boasts a clay tennis court, an ocean-view swimming pool, 13 bedrooms, a “cottage” (with its own pool) and a “barn” for entertainment. Stephen Schwarzman couldn’t be reached for comment, because he’s in the midst of planning a surprise hostile takeover of the property. On a related note, Tom Hudson has just agreed to go in on a summer share in hell.
Sachs’ CEO Drops New Money on ‘Old Trees’ [Radar]
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CEO
Morgan Stanley Considers Goldman Sachsian Approach To Compensation (Follically-Speaking)
By Bess Levin
John Mack, like the Tom Arnold of investment banking (take a second on that one), has overcome huge odds to fight his way back to the top of his game.** Last year, the Morgan Stanley chief, who was shown the door in 2001, received a raise of 38% to take home $41.4 million, reports CNN Money. The package was comprised of a base salary of $800,000, $36.2 million in restricted stock, $4 million in other stock options, miscellaneous compensation of $15,447, $67,963 in pension benefits, $6,100 in matching 401(k) money and, perhaps most importantly, in the parlance of our times, use of the company jet valued at $321,848.
Earlier: How Goldman’s Managed To Stay Out Of The Backdating Scandal
Morgan’s Mack sees hefty pay raise [CNN Money]
**Rocky seemed too easy and we thought it was about time we—Carney—went public with our feelings for Carpool.
Is it too early to start talking about bonuses for 2007? Bear Stearns doesn’t think so. It has already set up a bonus pool for its top executives, according to a recent SEC filing.
From Reuters:
A maximum bonus pool of $165 million has been established for a group of five senior executives that includes Bear Stearns Chief Executive James Cayne, the company said. Payout will be pegged to the company’s return on equity. No executive can get more than 30 percent of the total pool, which can be as little as zero.
Bear Stearns’ compensation committee also approved the performance goals for a second bonus pool for seven other top executives. The maximum amount will be $140 million, with awards based on pretax return on equity, departmental income and expense controls.
These numbers include cash and non-cash bonuses. So if you do the math, the maximum bonus for, say, James Cayne for 2007 will be $49.5 million, or about $3 million dollars less than the co-presidents of Goldman Sachs got for last year.
We can’t help thinking that this suggests a new recruiting slogan for Bear Stearns: “Bear Stearns: It’s like working for Goldman in 2005. Wall Street The Old Fashioned Way.”
Bear Stearns Companies Inc 8-K [SEC]
Bear Stearns sets up $305 mln executive bonus pool [Reuters]
Yesterday we told you that the reason for the Dubya’s visit to Wall Street was two-fold: to create the illusion that he’s done something besides screw up in Iraq and post admirable poll ratings, and to inconvenience those of you in need of caffeine. Apparently there was another reason he hopped on the Acela from Washington Wednesday morning: to shame business leaders for shirking their responsibilities to dole out appropriate salaries and bonuses to C.E.O.s. Though there was no heckling (except from Nardelli, but he always heckles), Bushie’s instructions to “pay attention to the executive compensation packages that you approve” and to make salaries and bonuses commensurate with the “C.E.O.s…success at improving their companies and bringing value to their shareholders” was reportedly met with “silence.” (A point of contention: was the lack of laughter due to bitterness at the idea that the president might be leaving them penniless, or shock over having a guy who’s not yet mastered the riding of a bike or the swallowing of a pretzel, let alone the running of a country, give a lecture on earning one’s keep?) Though he took a shot at the Dems’ plans for legislation that would require shareholder votes on pay packages (saying he didn’t think the government should get involved), he made sure to praise the Securities and Exchange Commission, commenting, “I appreciate the fact that S.E.C. has issued new rules to ensure that there is transparency when it comes to executive pay packages…the print ought to be big and understandable.” Like, you know, the font size and reading level they might use in the Hardy Boys series, or maybe even them See Spot Run books.
Why Did Bush Step Into C.E.O. Pay Debate? [NYT]
…every corporate executive and his mother (and her mother) taking the company jet on unauthorizedish jaunts? Todd Thomson, sure, he needed some privacy a few thousand feet above ground to seduce the $Honey, that we get. But what about everyone else? Like, for instance, Applebee’s former CEO Lloyd Hill? In a letter to the chairman of Applebee’s International’s (APPB) compensation committee, CEO Douglas Conant, from Richard C. Breeden (obtained by footnoted.org), DC is informed of the error of his “free rides for everyone” ways:
On 29 occasions from April 2006 through January 2007, Applebees’s corporate aircraft flew into and out of Galveston, Texas, where former CEO Lloyd Hill happens to own a beach house. The nearest Applebees’s restaurant is more than 40 miles away. Though Mr. Hill ceased to be CEO in September 2006, company planes continue the Galveston shuttle.”
We do not believe that shareholder interests are served by turning corporate aircraft into flying limousines for senior executives’ personal vacations. Just as importantly, this practice is inconsistent with the wholesome “neighborhood values” that Applebee’s claims to embody as a company. I am quite certain that most Applebee’s customers would be shocked to find out that a portion of the cost of their meal goes to fly the former CEO back and forth to his beach house aboard a corporate plane.
Allowing someone to fly the company plane to his beach house when he doesn’t even work for the company anymore is one thing, but bucking Applebee’s “wholesome neighborhood values”? That a portion of the $9.99 that Bob Loblaw is shelling out for his Fiesta Lime Chicken™ is paying for? That is just wrong, my friend. This is why Applebee’s is on the decline.
(NB: footnoted asks in a P.S.: “Just imagine if some other folks started digging into corporate flight logs — now that would make for some interesting proxy reading. In fact, this sounds like a great wiki-project for footnoted.org readers. Anyone interested in helping to pull this together?” Obviously we’re huge fans of FN and read it daily but here’s a question—what in god’s name do you think the point of this is? Our own personal amusement?)
A day at the beach…[footnoted.org]
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