Investment management CEO pay plunges in US

Chief executive officers (CEOs) at investment management firms in the US saw bonuses plunge by an average of almost 70% last year, wiping out gains in their base salaries of 7%, a survey shows

The plunge in pay applied to both small and large firms, according to the survey sponsored by the Chicago-based consulting firm, Capital Resource Advisors (CRA).

CRA said that despite the fall in compensation at the top, the money management industry has yet to feel the pain of the economic downturn as acutely as other financial services businesses.

Steve Unzicker, CRA's director of knowledge, said: "Last year was one of the industry's worst on record, yet the average firm still managed to produce operating margins of 29% and pay their CEO $2.5m."

Average total compensation for senior equity portfolio managers slipped only 2% from the previous year, while their fixed income counterparts saw their pay cut an average of 6%.

Variable compensation took most of the hit, while salaries remained relatively stable, rising from 35% to 37% of operating expenses.

Although 54% of firms said they planned to add or expand eligibility for equity participation, in reality key executives and investment management professionals own, on average, a combined 51% of their firms, accounting for 80% of employee-owned shares, CRA said.

But more companies have begun to use firm-wide and business unit performance to drive incentive plans, CRA said. The percentage of firms funding their bonus pools on the basis of pre-tax profits rose from 42% last year to 48%.

There is also evidence of a trend towards greater transparency in the compensation process. The percentage of companies formally communicating their bonus structure, guidelines and process to their employees rose from 65% to 72%, the findings show.

CRA will publish more detailed findings later this month