Cuts are coming to the House of Dougan next month. Read more »
I’ve been thinking a lot about financial industry compensation recently, and probably so have you, for different reasons. As a non-recipient of said compensation, I’ve been waxing philosophical about how your bonus can incentivize you either to put on low-risk trades that are unlikely to blow up your firm or to go instead with high-risk overlevered bets that look good in December but will leave the place a smoking ruin in March, by which point you’ll be out of there with your pile of bonus CLOs. But if you don’t take kindly to other people telling you what to do / “incentivizing” you to do it, there’s always the do-it-yourself bonus, either in the traditional form (write checks to self) or in the slightly more complicated form of writing down the amount of money that you would like your trades to make, then getting a bonus based on the number you wrote down: Read more »
The cuts won’t go down until the spring, so just something to keep in mind. Read more »
Paying Bankers In Derivatives Worked Out So Well For Credit Suisse That They’re Going To Do It AgainBy Matt Levine
Dealbreaker has long admired Credit Suisse for being on the cutting edge of creative approaches to compensation. In 2008, they gave bankers bonuses consisting of “toxic assets” to (1) incentivize the risk-takers to stick around and (2) remind people that “toxic assets” is a meaningless term if you don’t consider price. That worked out okay. This year, they’re giving junior mistmakers bonuses consisting of nothing, as a gentle reminder that there are other, similarly nonremunerative careers that might be better suited to their interests and talents. That also seems to be working. And now there’s this piece of magic:
Credit Suisse Group AG, Switzerland’s second-biggest bank, plans to pay a portion of senior employees’ 2011 bonuses in bonds packaged from derivatives linked to about 800 entities.
The move “is a risk transfer from the firm to employees,” Chief Executive Officer Brady Dougan, 52, wrote in a memo to the firm’s staff and obtained by Bloomberg News. “We are trying to strike the right balance and align employees with shareholders. These measures help to put us in a good place and to perform well in 2012.” …
The bonds mature in nine years and will pay a coupon of 5 percent for Swiss franc holders and 6.5 percent in U.S. dollars “for holders elsewhere,” Dougan wrote. Credit Suisse will absorb the first $500 million of losses on the portfolio, according to the memo.
How can you not love this? My favorite part is that shareholders eat the first tranche of losses. OOOH NO BANKSTERS ROBBING SHAREHOLDERS, you think – well, not you, but someone thinks – except no. Read more »
A couple weeks back, a report circulated that Wall Street banks were considering freezing compensation for junior employees. The firms were hesitating, however, supposedly on account of the backlash they feared would occur from failing to keep “potential future stars…engaged and happy.” Yes, they were terrified at the consequences of how their junior mistmakers would react to the news and didn’t want to pull the trigger unless everyone promised to do the same, preventing a dire situation wherein a handful of first and second year analysts quit to join firms where their unique talents would be appreciated. Credit Suisse CEO Brady Dougan, for one, has decided not to be afraid anymore. Read more »
Remember, back in December 2008, when Credit Suisse announced it would be paying out bonuses comprised of toxic assets? And Brady Dougan was staring at the business end of a hissy fit from many a miffed employee, who thought good and hard about threatening to leave before realizing it was cold out there? Apparently things turned out pretty okay for them. Read more »
Report: Trembling In Fear, Wall Street Banks Want To Make Sure They’ve Got Each Others’ Backs Before Invoking The Wrath Of 22 Year-Old Junior MistmakersBy Bess Levin
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? Read more »