Bonus Scorecard: What Each Bank Did
If you're in the fortunate position of being able to choose which bank you'll work for, you'll be interested to learn which among the largest global institutions have taken the least harsh approach towards bonus reform in recent weeks. Here's our ranking, with the most favorable at the top.
1). JPMorgan: While other banks are talking about clawbacks and very long deferrals, JPMorgan remains relatively unrepentant on current bonus structures. Little has been said publicly on bonus reform at JPM, and last week Jamie Dimon defended bonuses for hard jobs, comparing running a bank in the current climate to 'Vietnam.' As one of the banks that's received TARP money, JPMorgan is confined to paying no more than $500k in cash to its 'senior executives.'
2). Goldman Sachs: Monday, Lloyd Blankfein wrote an op-ed in the Financial Times. He called for an increase in the equity portion of deferred bonuses, for the evaluation of performance over time, for chief executives to be required to retain most of the equity they receive until retirement, and for equity delivery schedules to continue vesting after individuals have left the firm. However, with the exception of increased equity, there is little sign that any of this is currently in place at GS. Moreover, Goldman is helping its bankers out by easing the rules on restricted stock. TARP restrictions apply.
3) French banks: Individual French banks have been tight lipped over bonus reform plans. Monday, however, they signed up en masse to a new code of honneur ethics agreeing to limit bonuses, peg them to long term performance rather than short term profit, pay more stock, and eliminate guarantees for any non-key staff. None of this looks too onerous at first sight.
4). Barclays Capital: It emerged Tuesday that BarCap has introduced a more ponderous deferred compensation regime, under which its bankers will receive compensation in three stages - 50 percent up front, followed by two further payments of 25 percent each over the next 24 months. The good news is that there are no clawbacks and interest of 10 percent will be paid on the deferred portion.
5). Bank of America: Like BarCap, BofA has introduced a deferred comp scheme. Called the Additional Principal Programme, this apparently involves placing 70% of the bonus pool into a deferred regime, under which the first third will be paid out in quarterly payments this year, followed by the second and final thirds in 2011 and 2012. The remaining 30% will go into an equity deferral plan vesting over the next three years. TARP restrictions apply.
6). Citigroup: Around 25 percent of Citigroup bonuses are said to have been paid in the form of cash and shares paid out over the next four years. This compares favourably to the institutions listed above. But Citi is also said to be imposing clawbacks, which doesn't. TARP restrictions apply.
7). Dresdner Kleinwort Commerzbank: Ok, Dredsdner doesn't exist any more and Commerzbank's commitment to UK investment banking is suspect, but it's worth sparing a thought for what's coming to pass at the former DKW. Bankers at the firm were told their bonus numbers last year, but someone apparently came up with the cunning plan of making them contingent on the bank's performance until the payment date. DKW bankersr are also alleging that Commerz is reneging on guarantees.
8). UBS: It's not pretty at UBS either. The bonus pool at the investment bank is down 85 percent, and some MDs and SVPs/directors have apparently been told they'll they receive no bonus this year followed by 100 percent stock bonuses in 2010, vesting over three years. UBS has also introduced clawback or malus provisions, allowing it to refrain from paying that stock if the bank incurs a loss during the vesting period.
9). RBS: As things stand, RBS is one of worst of the lot. No one anywhere in the bank can receive more than 25k in cash.
10). Credit Suisse: The least appealing programme of all - unless the CDO market makes a comeback. Credit Suisse is paying 70-80 percent of all bonuses for directors and MDs out of its stash of toxic assets. Recipients will be exposed to the first 15 percent of any losses and payments will only start after five years. In the meantime, recipients will receive a dividend of 2.5 percentage points over LIBOR, which is repayable if they try to escape. The only upside will come if the toxic assets are priced so low that they've appreciated in value in five years' time. Many CS bankers may not hang around to find out.