Gary Cohn, president and chief operating officer of Goldman Sachs, said Thursday that the bank might have to consider retreating from Europe, given the Eurozone’s firm stance of enforcing bonus caps and the potential introduction of a financial transactions tax.
Speaking at the Markit annual customer conference in New York, Cohn was only vocalizing what a lot of bank executives have probably been thinking for a while. "We have to be thinking about moving,” he said. “If we cannot attract the best people that is a big hindrance to our business."
Under the new bonus cap laws, approved by a vast majority of the European Parliament in April of this year, banks as of January 2014 are most likely going to be banned from awarding bonuses in excess of salary. Exceptions can be made if shareholders agree, in which case the cap could be up to 200% of the salary.
The US has generally had a higher bonus-to-salary ratio than Europe. In 2012, for example, U.S. investment banker bonuses were 60% higher than those of their European counterparts. This disparity is consistent with their respective overall performances for 2012. As we reported earlier this month, European investment firms were responsible for only 23% of global investment banking revenue–the lowest share on record–while the US had its greatest revenue share in over a decade.
Clearly implied in Cohn’s threats is that capping bonuses de-incentivizes banking professionals, and that no one would choose a European posting over a US one if given the chance. We won’t have enough data to know for sure whether this is true until the bonus cap has been in place for a number of years.
World’s Coolest Accounting Firm (eFinancialCareers)
Which accounting firm offers flexible working, back-up daycare, and will even send someone round to your house to wait for the cable guy?
Witch Hunt (NY Times)
Beleaguered JP Morgan Chairman and CEO Jamie Dimon has a few defenders. Time and the NY Times ran opinion pieces this week questioning why he was singled out. JP Morgan Lead Director Lee Raymond has jumped on the bandwagon.
IRS Eyes Private Equity Tax Move (WSJ)
The IRS is examining the validity of management-fee waiver or fee-waiver conversions, which have been used for years by partners at some of the nation's largest private-equity firms to reduce their taxes, and can involve significant sums.
Next Time, Try a Bounty Hunter (Financial Times)
The California attorney general’s office is suing JP Morgan Chase for allegedly flooding the courts with “unlawful” suits aimed at collecting credit card debts.
Use Your Bloomberg Every Day (NY Post)
Goldman Sachs execs are accusing Bloomberg of using information on the use of their terminals to guess at which employees might no longer be with the company.
The Bad Kind of Viral Video (Bloomberg Businessweek)
How do you tell 400,000 employees that they’re doing a bad job? How about doing what IBM CEO Virginia Rometty did and tell them via company-wide video?
Ex-GLG Stars Poach Man Group Colleagues (eFinancialCareers)
APQ Partners, the emerging markets hedge fund set up by ex-GLG Partners traders Bart Turtelboom and Karim Abdel-Motaal, has been assembling its investment team from Man Group veterans ahead of its launch.
Buzz Around the Office
Chicken Is a Vegetable, Right?
Food retailer Whole Foods had to do a massive Northeast salad recall after it accidentally tricked vegans into eating real chicken salad when it swapped labels between soy and real curried chicken–creating allergy panic.
List of the Day: Acing the Phone Interview
The initial phone-screen interview is just as important as a live one. Follow the same etiquette.
1. Don’t miss the details: Who originates the call?
2. Don’t make a call from a noisy place
3. Tell your family/ roommates not to bother you
(Source: AOL Jobs)