Hi all,
Have some topics that I am confused about that never understood what happens in practice.
Let’s say you are a Director at a BB who leaves for a corporate gig that your group helped you land once it was clear you were not going to become MD - would you really lose all of your deferred comp that was not vested that was built up? That could be a very, very significant chunk of change if you were at the BB for a long time since analyst / associate years.
What typically happens to deferred comp for a director that is not going to make MD?
Is it typical at all for a corporate to pay out part or all of the balance as a sign on? Or will the bank let you keep if you leave on good terms?
What about if you are last year director and don’t make MD so are fired since you do not have a spot anymore?
I am a soon to be director now and don’t see myself becoming MD (for lack of motivation not b/c group doesn’t want me). What I am playing with is coasting for few more years and collecting the checks, but then am I better off just not quitting and getting fired when I don’t make MD so I can keep my comp?
Just never understood how this stuff works in practice at the relatively mid/senior levels of banking.
Yes, before the snarky “this is what golden handcuffs mean” comments come in - I already get that concept.
Pretty sure you lose it unless you can negotiate it.
Only get to keep it if you get fired.
Deferred comp is typically on a ladder and at the Director level should only be 20-30% of total bonus comp. For simplicity, let's assume you got a $100k bonus over the last 3 years with 25% in deferred comp.
2024 bonus: $100k x 25% = $25k. 100% lost if you leave within a year. $25k
2023 bonus: $100k x 25% = $25k. 2/3 lost if you leave within 1-2 years. $16K
2022 bonus: $100k x 25% = $25k. 1/3 lost if you leave within 2-3 years. $8k
If you get fired (not for cause), you should be entitled to all of your deferred comp + likely severance.
If you leave to a corporate (whether its on your decision or loosely "forced"), you most likely will lose out on that deferred comp. If you're looking at the amount above, most corporates will pay that out. Also, bonus language can also be structured so that you only lose deferred comp if you exit to a competitor (another bank)
Yes I work at a BB so get the 20-30% payouts.
Those are super low bonus numbers, even for an associate.
Are you suggesting that if it’s higher corporates won’t pay it out? A director could have $500k+ in deferred comp if he spent career there
To be clear - you're not going to have $500k in deferred comp as a Director unless you brought in $1m bonus for three straight years. Your next firm paying it out depends on how much they want you.
Ultimately, you need to read your bonus agreement as each bank is different. For example, my bank only restricts deferred comp payout if I go to a competitor.
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