After the 2004 bonus round, don't cross a managing director (MD) in cash equities. Whether in London, New York or Frankfurt, MDs are unlikely to be in a good mood with only 400,000 pocketed.
When last year's bonus pots were divvied out, senior staff in cash equity sales and trading got smaller-than-expected portions according to headhunters. It's a trend that was repeated across the major financial centres. But in Europe, at least, vice presidents (VPs) in cash equities had reason to celebrate.
City of London: MDs suffer
Senior staff on cash equity desks are smarting in the City of London. Mark Shirley, an equities specialist at headhunter Sheffield Haworth, says MDs were expecting bigger bonuses in 2004: "For a significant proportion that didn't come through."
Shirley says London MDs in cash equities were typically paid the same as 2003: 'I haven't come across anyone who was paid down, or has truly thrown their toys out of the pram in a fit of pique about what they weren't paid.'
Rivals are not so sure, however. According to two other headhunters, who asked not to be named, MD bonuses were down 15% to 20% in cash equities in 2004 versus 2003. 'MDs had it worst,' says one, 'There was a real cap on senior level people. People who were earning a couple of million a few years ago are now lucky to push 400,000.'
London headhunters agree VPs in cash equities did well from 2004. 'People in their late-20s to mid-30s were rewarded for their patience and perseverance over the last couple of years,' says Shirley. 'A number of people at different houses were re-rated and saw pay rise 40%.' He says some senior VPs in cash equity sales and trading are now earning total comp of 300,000 plus.
Wall Street: Bonuses down double digits
Ken Randel, with executive search consultants the Options Group, says bonuses on the Street for cash equity salespeople and traders were down an average of 10% to 15% compared to 2003.
Vice presidents trading cash equities earned salaries of between $100,000 and $150,000 on average, says Randel, plus bonuses of $100,000 to $500,000. Salespeople in cash equities earned a similar base, plus bonuses up to $400,000.
Managing directors in cash equities sales and trading saw base capped at $250,000, with bonuses averaging $600,000 and $500,000 respectively.
Randel says lower pay came as a surprise for many. 'A lot of people were more profitable last year than in 2003. They were expecting pay to get back towards 2000 levels, not to drop again.'
But the halcyon days of 2000 look to be well gone. 'We've seen trading desks reduced as they are automated out of existence and capital is pulled away,' says Brad Hintz, a banking analyst at Sanford C. Bernstein & Co. in New York. 'Margins are under attack. The response is to reduce costs.'
Hintz says cost cutting is bad news for senior staff. Cash equity desks on Wall Street are shifting away from expensive senior people in favor of cheaper, younger people, he says.
Frankfurt: Flat MDs, buoyant VPs
Tim Zühlke, a consultant specializing in equities at Frankfurt headhunter Smith and Jessen, says salespeople on cash equities desks received disappointing bonuses last year.
'Bonuses were not good in light of expectations,' says Zühlke. 'After a good year and drastic cost cutting, people were expecting to be well paid, but it didn't happen.'
Unsurprisingly, MDs came off worst. 'Seniors were paid more or less flat, even if they produced well,' says Zühlke. 'It was the good VPs who saw pay rise.'
He says VPs in equity sales in Germany can now expect total packages of €150,000 to €220,000. MDs in cash equities can expect to earn €500,000 to €700,000.