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Wall Street Pay Reform: Higher Base

Citigroup and Bank of America reportedly plan to raise investment bankers' salaries, after Morgan Stanley unveiled a similar move last week.

"Both Citigroup and Bank of America, like Morgan Stanley, hope higher base salaries will retain key employees" in the face of government-imposed limits on bonuses for institutions that received federal bailout aid, The Wall Street Journal reports, citing unnamed sources. The story provides no salary numbers.

The steps could foreshadow a bifurcation in Wall Street compensation structures, with banks that remain on public assistance shifting pay from variable bonuses toward higher fixed salaries, while those financially strong enough to return the taxpayer aid they received last year may stick with the traditional bonus system.

For instance, two unnamed sources told the WSJ that JPMorgan and Goldman Sachs are not considering raising base pay. However, compensation consultant James Reda says JPMorgan and Goldman will have to follow suit to remain competitive.

The moves come as the Obama administration is drawing up its own proposals to reform banks' compensation practices. The adminstration's pay reform program is expected to be released by mid-June and apply to all institutions, not just those involved in the bailout program.

At Morgan Stanley, an SEC filing last Friday reported base salaries for five C-level executives will rise to the $750,000 -$800,000 range, from $300,000 - $600,000. Salaries for Morgan Stanley's 1,000 or so managing directors will also rise, according to the WSJ. The filing says the changes "are not intended to increase total annual compensation," but to improve the balance between fixed and variable pay.

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AUTHORJon Jacobs Insider Comment

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