bonuses

  • 18 Jan 2012 at 12:26 PM
  • Banks

Goldman Sachs Now Paying Employees For A Full Year Of Work

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I know I’ve said that the Jamie & Doug in the Morning Show is the best call-in program in finance, given Jamie Dimon’s reliably amusing anti-regulation rant, but the true connoisseur should also really get a kick out of David Viniar’s calmer, wonkier, more NPR-appropriate chat. I certainly do. We’ll maybe have more to say about it later.

My enjoyment is, however, complicated by the fact that at this time of year I feel certain feelings. Specifically, feelings about Goldman Sachs comp, which will be terrible, horrible, down 115%, whatever, and yet … still … somehow … I want it. Have we talked about this before? Sometimes I miss investment banking. A thing that some people not in the industry don’t know about investment banking is that it is an awesome job, in the specific sense that many people would do it for free, or even pay money to do it, and in the even more specific sense that sometimes they do. (For, um, fairly loose definitions of “pay money.”) This happened twice during my time at Goldman. Let’s all luxuriate in a chart:
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  • 18 Jan 2012 at 11:13 AM

Bonus Watch ’12: JPMorgan

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The take-away here is put in for that transfer to Brazil? From the front lines: Read more »

  • 12 Jan 2012 at 4:50 PM
  • Banks

Your Comp May Be Down This Year, But At Least You’ll Have The Satisfaction Of Annoying A Random Shareholder Activist

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Hey, so, if you work at a bank, you may have heard about this, not sure, but your comp will be down. Just a bit. Unless you’re a junior mistmaker Chez Dimon. But otherwise, yeah. Down.

Another thing you may be less aware of is that some people are actually not so unhappy about that. A few of them even think that it’s possible that your pay should be down some more. And they think someone should really look into that:

Giant firms are expected to cut executive pay by some 30% from 2010 levels, consultants say. And since the financial crisis of 2008, firms have reduced cash bonuses, increased their use of company stock and added clauses that allow them to recoup—or “claw back”—pay in certain circumstances.

Even so, some investors want more changes. In December, the Nathan Cummings Foundation—a private charitable organization and institutional shareholder—filed proposals asking that directors at Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. address potential reputational damage that big pay packages could bring to the banks, said Laura Campos, director of shareholder activities at the foundation. The proposals also request that they study how such awards could reduce banks’ ability to spend money on other areas, and report those findings to shareholders.

Shareholder resolution activists (not to be confused with, like, real activists) are mostly pretty silly creatures and this is a pretty good example of why. The Journal tries valiantly to make the efforts of Nathan Cummings and his eponymous foundation relevant to the hot-button issue of how much bankers get paid, but it’s pretty clear that the NCF is focused on a thing called “executive pay.” Executive pay is sort of an irrelevancy for investment banks, mostly, since it makes up a relatively small fraction of comp, and since lots of people at banks get paid executive amounts of money without being a named executive officer. And as long as the Nathan Cummingseses of the world are focusing on how much the Lloyds/Jamies/James-not-Jamies of the world are getting, they will probably stay away from your now-30%-paltrier comp.

Other fearless crusaders for shareholders have noticed this, however, and are more interested in going directly after your money, though they have yet to resort to the rather infra dig expedient of shareholder resolutions. Instead they do things like complain to Andrew Ross Sorkin, who earlier this week said: Read more »

  • 09 Jan 2012 at 8:58 AM

Bonus Watch ’12: Goldman Sachs, Morgan Stanley

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The bad news: if all goes according to plan, bonus numbers, which will be communicated over the next couple weeks, will have you weeping unconsolably at your desk, shrieking “No! Get away from me!” at worried colleagues approaching to offer comfort. The good news: assuming you don’t get fired for wiping said tears on Gary Cohn’s pant leg when he comes by for a chat, there’s nowhere to go from here but up. Read more »

Chiesi Sisters Could Use A Break In 2012

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A couple weeks ago, we mentioned, as a cautionary tale, the story of a Do It Yourself Bonus backfiring. Helen Kapoutos, a 28 year-old personal assistant, was charged with embezzling $170,000 from her boss, a former trader who met her in a strip club and was paying her to do household errands and sometimes have threesomes with him and his fiancée, who is apparently the sister of the currently incarcerated Raj Rajaratnam gal-pal, Danielle Chiesi.

  • 04 Jan 2012 at 10:47 AM

High-Level Jefferies Employees Were Ready To Pack It Up And Leave Until They Realized It’s Not 2007

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Several executives and other employees in Jefferies Group Inc.’s prime-brokerage unit threatened to leave the firm in a dispute over issues including a recent restructuring and year-end compensation, people familiar with the matter said. The dispute led to a series of meetings Tuesday involving Jefferies executives and its global head of prime brokerage, Glen Dailey, the people said. Mr. Dailey, in response to questions from The Wall Street Journal, acknowledged the discussions but said no one was leaving, adding, “family affairs are now in order.” [WSJ, earlier, earlier]

  • 14 Dec 2011 at 4:02 PM

Bonus Watch ’11: Credit Suisse

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Speculation has been going around that some employees will be receiving a whole lot of nothing. Read more »

  • 14 Dec 2011 at 11:49 AM

Bonus Watch ’11: Jefferies

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Good news and less good news. The good news: junior mistmakers needn’t worry much about the new rule stating that one’s bonus will be taken back should he/she leave the firm for greener pastures less than a year after the money hits the bank. The less good news: Read more »

  • 13 Dec 2011 at 4:20 PM
  • bonuses

Bonus Watch ’11: Jefferies Employees Might Not Want To Make Any Sudden Movements

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Maybe you’re a Jefferies employee who thinks the light at the end of the tunnel is near. Bonus time’s a’ comin’ and once you get yours, you’re out of this place, you’ve told family and close friends. Just a couple more months and you can bust out. Break free. Live again. Just gotta wait for the money for last year’s work to hit your account and bye-bye Jefferies, hello the first day of the rest of you life, right? WRONG! Jefferies is trying out something new this year and it’s called you’re not going anywhere. Read more »

  • 07 Dec 2011 at 2:58 PM

Bonus Watch ’11: Citigroup

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Thinking you’d be getting a bonus this year? Think again, says the anonymous banker who spent the day bursting innocent financial services employees’ bubbles and asking young children “riddle me this” re: why they think anyone other than their parents would not only a) give rat’s ass that they went through the normal incidence of aging known as losing one’s tooth and b) compensate them for doing so? Read more »

  • 05 Dec 2011 at 5:40 PM

Maybe Bank Stocks Are Down YTD Because That’s How Bankers Want It?

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We’ve talked before about the theory that paying investment bankers in stock gives them an incentive to maximize the volatility of their businesses, which is a thing that some people don’t want so much. This starts from the notion that in a 10 or 20 or 30:1 levered bank or broker-dealer or futures merchant, the bulk of the money at risk belongs to the creditors, whether unsecured or depositors or repo or ex-wives or whatever. So it’s plausible to think of the equity as an at-the-money option to buy the assets from the creditors. And as any Level I CFA test completer could tell you with approximately 70% probability, the value of an option increases with volatility. If you own the equity in a bank with $29 billion in debt and $1 billion in equity market value, then you’ll prefer equally likely payoffs of [$25, $35 billion] to payoffs of [$29.99, $30.01 billion], because the higher volatility payoff increases the expected value of the equity (which, after all, can’t go below zero). If, however, you are a creditor of that firm, your preferences are the opposite.

This is all pretty straightforward and orthodox, and it probably ought to inform how you think about the incentives to bankers from owning their bank’s equity, and if you think that way then maybe you come up with ideas like “pay them in CDS” or whatever. On the other hand this theory shouldn’t be taken too seriously. When your entire net worth is in Jefferies stock, “the equity can’t go below zero” isn’t all that comforting.

But it’s worth remembering that incentives from owning equity are not exactly the same as incentives from being paid in equity: people who have a lot of stock feel different from people who stand to one day get a lot of stock. That’s the interesting takeaway from this weekend’s DealBook piece about the fact that bank stocks sometimes go up. (And sometimes they don’t.) For example:
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