Corporate finance staff at accounting firms lose bonuses

Most firms usually pay a minimum bonus of 10% to 20% of basic salary, but dismal market conditions in 2001 meant many teams got no bonus at all, the analysis from Michael Page has revealed.

The top end of the bonus scale shrunk last year as well, with 50% the largest paid, down from 100% in previous years. Matt Leedham, manager at Michael Page Finance, said: "The whole range has moved downwards." He added that he expected the trend to continue when firms paid 2002's bonuses this autumn.

Leedham estimated that as many as half of those surveyed by Michael Page had not been paid bonuses, although he emphasised that no accounting firms had refused to pay bonuses to all their corporate finance staff.

Bonuses have become an increasingly important tool for accounting firms to lure investment bankers into their corporate finance arms. "The level of expectation over bonuses has been rising over the past five years," said Leedham.

Many bankers had chosen a bonus instead of overtime payments, which accounting firms traditionally used to motivate employees. The dramatic fall in bonus payments may mean staff would have been better off with overtime. Leedham said: "Overtime might currently represent a slightly more attractive bet than a bonus."

Corporate financiers are not alone in having to accept smaller bonuses. A panel of specialist headhunters said although basic salaries can be expected to stay stable, bonuses this year will fall some way short of an "average good year".

The panel estimated the typical pay package of a private equity director at a large US bank would be 115,000 (€180,000). Shirin Stanley, from Alexander Mann Global Markets, said a director might expect a bonus of between 350,000 and 500,000, not including carried interest which can be well in excess of the bonus.

However, 2002 has not been "an average good year", as activity in the private equity sector shows few signs of picking up, and exit opportunities are scarce. Stanley said: "Prospects for private equity and venture capital remain uncertain. Contrary to expectation, reduced valuations have not led to an increase in deal activity."

Remuneration depends upon performance, which this year has been terrible at most big banks. Shaun Springer, chief executive of Napier Scott warns that many will be lucky to get any bonus at all.

Against such a background, it is the real diehards who have stayed on top. A typical director in private equity at a big US bank will have come from a corporate finance or merger and acquisition specialist background, and will probably have some experience of building up relationships with small to medium-sized companies.

In today's market, they will also need patience and staying power, be prepared to fight with competitors for whatever business there is and put up with considerably less money than in previous years. Mindset is what matters most.