Investors Tell Diamond to "Tone Down" Bonus

Next time you think we have it bad here with all the Dodd-Frank hullabaloo, imagine if you worked in a country where your bank actually had to care what investors thought. Such is the dilemma facing Barclays CEO Bob Diamond, as he has been warned to "tone down" his annual bonus before the number has even been announced.

It's no secret that banker bonuses are a hot button issue in the UK, much more so than they are here. Diamond made a respectable £1.35 million in salary in 2011, and his bonus could be as much as 2.5 times that. Unfortunately for Bob, that's a little more than UK investors are willing to shell out for his stewardship of the bank.


The newspaper quotes Robert Talbut, chairman of the investment committee at industry body the Association of British Insurers, saying that Diamond's bonus--if press reports are accurate--isn't an appropriate "signal of the change required to improve the investment case at the bank."

The article goes on to mention in passing the fact that RBS CEO Steven Hester was forced to forfeit his entire bonus after the public outcry that he'd be paid even one penny more than his salary.

So again, the next time you're feeling sorry for yourself about all the ill will towards Wall Street in the US, at least take comfort in the fact that our brethren in The City have it far, far worse.

On the other hand, what does a bank CEO even do anyway?

 
Best Response

The bank had a 6-7% return on equity or something (haven't checked the numbers, this is an estimate from the press). Its not government owned, but why should he expect a massive bonus?

I don't understand the appeal of making £1-5 million as the CEO of a global investment bank when you can make more money raising money for a $500 MM fund or doing a similar sized acquisition for a client/friend.... also, you don't need to spend 40 years of your career to get to that level.

Having said that, its great that you can get competent CEOs for that kind of money, or even less. I'm just saying, I don't think its a decent trade off given the sacrifices / alternatives from my point of view.

 
Relinquis:
The bank had a 6-7% return on equity or something (haven't checked the numbers, this is an estimate from the press). Its not government owned, but why should he expect a massive bonus?

I don't understand the appeal of making £1-5 million as the CEO of a global investment bank when you can make more money raising money for a $500 MM fund or doing a similar sized acquisition for a client/friend.... also, you don't need to spend 40 years of your career to get to that level.

Having said that, its great that you can get competent CEOs for that kind of money, or even less. I'm just saying, I don't think its a decent trade off given the sacrifices / alternatives from my point of view.

Fair point. But the real crux of the argument here is that the government and the non shareholder public shouldn't have the right to decide and coerce certain bonuses jus because they don't like that some people make more many than they do.

 

If we are assuming the investors mentioned are partial owners of Barclay's, then they absolutely have the right to suggest that executive bonuses should be reduced. On the other hand, Barclay's has the right to pay management whatever the compensation committee deems appropriate, and then prepare for the wrath of the market. Welcome to capitalism.

 
Edmundo Braverman:
On the other hand, what does a bank CEO even do anyway?
Aside from guys like Jamie Dimon who build a firm, or guys that turn a firm around.....not a whole lot that dozens of others at the firm can't do. If the shareholders are feeding on public sentiment to cut their pay and save a buck, well, that's life. Now the CEO's know how it feels.
Get busy living
 
Connor:
CEOs make more like 40MM when times are good... I don't know where you get 1-5MM. Also it's not exactly easy for a fund manager to pull that much in every year for lets say 10 years.

Yes, in good times with stock and such CEOs can make more money (or if there are golden parachutes)... The £1-5 MM is what Barclay's CEO would make depending on his bonus... £1.35MM in salary + 0-250% bonus range.

The $500 MM fund raise should give you more than that in placement fees alone. You could charge £1-5 MM in fees on deals much smaller than that depending on what asset class, fund or security. If you were raising equity for private deals (corporate or real estate) for example you wouldn't need to raise $500MM... it was just an example.

 

I don't care if the shareholders say to turn down bonuses. The bank should listen to the shareholders. When the government tells them to do so, I have the inclination to tell them to fuck off. Barclay's did so-so this year, so they shouldn't get huge bonuses. I think that is obvious. For the health and public reputation of the firm they shouldn't do so. But at the same time, screwing over the little guys is a terrible thing to do. I would rather the bank keep bonuses tied to performance at the higher levels and at the lower levels just give out a normal range bonus. No 10k bonus for the analyst that busted his ass all year, and no $5mm bonus for the MD who di just enough deals to stay employed. On the flip side, don't stiff the producers- that's gonna hurt them in the LR. Even if every bankis screwing the rainmakers now, it just mens that when things get better the good people are gonna jump ship for nominally more money because they remember the screwing.

Reality hits you hard, bro...
 

Not sure what the bailout structure is/was in UK, but if it's like in US where $ was paid back plus interest (better than the mortgage sponges i.e Fannie and Freddie can say), public should stfu. Then again, UK is a much more entitlement based society (look at how students riot when they have to pay 70% of their own education costs as opposed to 60%).

 

Qui quasi maxime repudiandae harum. Natus perspiciatis commodi tempora quo exercitationem eos. Perferendis natus omnis quia ut non. Consequatur eveniet repudiandae optio dolores molestiae.

Et voluptas voluptas dolor ab sed. Debitis quidem inventore dolorum corporis. Et corporis eaque quae. Quo voluptatem beatae quia dolores cupiditate explicabo. Eligendi similique debitis quia.

Unde dolorem est consectetur iste est qui cupiditate sint. Quos distinctio veniam aut quaerat consectetur sunt odio voluptatibus. Tempore velit cupiditate voluptas rerum possimus dolor.

Dignissimos quia veniam sit molestiae magnam nulla distinctio. Sit ad voluptas vel error numquam. Ipsam nobis dolorem minus praesentium nesciunt doloremque et ab.

Metal. Music. Life. www.headofmetal.com

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”