"Peanut-butter pay." That's a model the latest bonus survey data suggest Wall Street firms are moving ever further away from.
"Firms have gotten much better at differentiating the good and the greats and the so-sos," compensation consultant Alan Johnson told CFO Magazine. Investment banks, he says, are stepping up their use of technology to avoid spreading the bonus pool "evenly, like peanut butter." He explains that firms "have gotten more sophisticated and efficient about how they get inputs," making intensive use of software to crunch data on individual performance.
CFO's story keys off on the results of eFinancialCareers' own annual survey of Wall Street bonus awards, released last week. It showed the proportion of respondents who received a bonus swelled to 92 percent from 79 percent a year ago. But disparities among individual amounts appeared to widen. Forty-six percent reported getting a bigger bonus than last year, gaining 100 percent on average. Meanwhile, 31 percent saw smaller bonuses - shrinking an average of 50 percent.
John Benson, eFinancialCareers' CEO, calls that an indicator of "true pay for performance...Banks are very keen to make sure they hang on to the rainmakers, the star performers," he observes.
A second takeaway from CFO's story: The media onslaught against Wall Street and its pay culture persuaded managements to actually shrink bonus pools, compared with what they would have done otherwise.
Benson warns there's more to come. "The realignment of Wall Street compensation is not yet over," he told CFO. "I think we'll continue to see the structure of how firms pay individuals evolve over time."
No More Peanut-Butter Pay [CFO]
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