The beginning of the end of the wall st. bonus

Interesting article today saying that because a lot of base pays were increased after the crisis to quell criticism that the finance pay structure encourages risk, some banker's won't be getting bonuses.

Any ideas on what sort of people this will affect? The article seems to say that some MD's whose base jumped from 200k to 400k (MS and CS did this), won't be getting a bonus. Does that make any sense? Can any of these banks really get away with paying an MD 400k? Or does this mostly apply to BO and MO as the article sort of implies.

More philosophically, does this mark the beginning of the trend away from large incentive based compensation?

Personally, I think that Wall St. needs to sack up and ignore the criticism - compensate according to what works for them and don't take into account what outsiders complain about.

http://finance.yahoo.com/news/This-Bonus-Season-o…

Comments (10)

 
Dec 20, 2010 - 2:43pm

They didn't say MDs at MS who's base rose to 400 from 200 would possibly get zero bonus. They said in response to increased scrutiny of bonuses, many banks have significantly upped base salaries.

As a result of the 2008 financial crisis, Wall Street firms like Goldman Sachs and banks like Citigroup raised base pay substantially in 2009 and 2010. They were seeking to placate regulators who had argued that bonuses based on performance encouraged excessive risk.

At Goldman, for instance, the base salary for managing directors rose to $500,000 from $300,000, while at Morgan Stanley and Credit Suisse it jumped to $400,000 from $200,000.

Even though employees will receive roughly the same amount of money, the psychological blow of not getting a bonus is substantial, especially in a Wall Street culture that has long equated success and prestige with bonus size.

Array
 
Dec 20, 2010 - 3:14pm

Eric Stratton:
I would rather get a higher base and less bonus assuming the total comp was about even.

I would in IBD, not in trading. In IBD it's more out of your control than in trading. You can still make great returns trading a down market; hard to do that in IBD, so having a more stable income in IBD would be preferable to hedge against this risk. Meanwhile in trading, if you really kick ass, it would suck to not be compensated for it.

 
Dec 20, 2010 - 3:52pm
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