The News: Poetic Justice in Pay
Getting paid is the best revenge. For bankers, that could become a happy consequence of compensation reforms sparked by public outrage over past pay practices. New payment models that substitute deferred stock for cash "could in fact be setting up (Wall Street's) top executives, bankers, and traders for even bigger payouts down the road," Reuters' Steve Eder reports.
To align pay with the long-term performance and discourage excessive risk-taking, banks are moving to pay a larger proportion of executives' total compensation in stock rather than cash and are spreading the equity payouts over more years.
Reuters' story cites Morgan Stanley's latest measures, reported Tuesday, and a Goldman Sachs plan announced early in December to lock up its top 30 executives' bonuses this year in stock that can't be sold for five years.
"It is not clear what impact any of these actions will have on risk-taking on Wall Street," Eder observes. "But one thing that is clear: these moves do not necessarily presage a new era of reduced pay in the financial sector."
If bank earnings continue to recover, adds Eder, "their shares could surge." So the new compensation schemes could end up enriching their executives even more than the previous formulas did.
We agree. And we'd add that the trend toward raising the proportion paid in the form of equity isn't confined to "executives," but extends to many non-executive front-office professionals. They, too, could find the current compensation reforms surprisingly rewarding.
The Reuters story focuses on the resulting risk to bankers' already dismal public image. To which we at eFinancialCareers News say: Image won't pay our kids' tuition. If bankers end up earning more from the political class's attempts to dock their pay, we'll call that poetic justice.
U.S. Banks May Only Be Deferring Anger on Pay [Reuters]
M&A Rebound Years Away as Morgan Stanley Sees 'Gentle Recovery' [Bloomberg News]
Russia to Curb Speculative Capital Inflows
Chinese Firm Says Won't Pay Goldman on Options Losses [Reuters]
The Next Finance Hiring Hot Spots [WSJ]
Judge Not Lest Ye Be Judged? [Kellogg School of Management, via PRN]