Restricted shares, after gaining momentum as a compensation vehicle the past few years, loom larger than ever in the current bonus calculus. They're emerging as an important new influence on compensation comparisons and related career choices, for both employees and bank recruiting departments.
A recent BreakingViews commentary neatly illustrates the new calculus: "This bonus season, would you rather be a banker at Goldman Sachs or Citigroup?" Its contrarian answer: After Goldman's share price more than doubled last year while Citi's slumped 50 percent, bankers who receive half their bonus in shares might actually prefer a Citi pay package to a Goldman one on a forward-looking basis.
Of course, it's naïve to conclude that Citi's shares are likely to return more than Goldman's this year just because they appear cheaper on measures like price to book value. But my point is different: Whether your agree or disagree with BreakingViews' back-of-the-envelope analysis, you're still virtually forced to take a view on how your prospective or current employer's shares will perform in the future - not only this year, but over the three years or longer before the restricted shares you'll receive as compensation will vest.
This recalls the 1990s Internet bubble, when even secretaries hopped like mad among tech start-up employers they'd fingered as likely to go public soon (and thereby make millionaires out of even entry-level workers who'd been paid in private shares and/or options).
Of course, whether you work in finance or not, your employer's financial health has always been the biggest near-term influence on yours. That's why financial advisers long warned workers of all stripes to avoid tying up retirement funds or other investments in their employer's stock. Now, it seems, many financial professionals are left with no other choice. So regardless which area of banking you work in, prepare to dust off your securities analysis and stock-forecasting skills. You'll need them to estimate your current compensation's value a few years hence, and to assign a number to any alternative deal you might get by jumping to a rival institution.
Citigroup Bonus May Trump Goldman's [BreakingViews, via NY Times]
Goldman Sachs Readies Bonus Bonanza, Braces for Backlash [ABC News]
Obama to Unveil Proposal on Bank Taxes [WSJ]
U.K. Bankers Give Up on Bonus Levy as Tax Rise Looms [Bloomberg News]
Fleeing the Wirehouse: Will the Big Firms Be Able To Change To Meet The Challenge? [Investment News]
Barclays To Buy Assignments From Market-Maker LaBranche[AP, via Investment News]
Soros Fund Is Said to Plan an Office in Hong Kong [BusinessWeek]
How to Break Into Investment Banking as a Career-Changer in a Part-Time, Non-Target MBA Program [Mergers and Inquisitions]