Investment bankers really aren’t that special, says former banker
Banking, perhaps more than any other industry, relies on human capital. There’s no widget to sell. Really, it’s all about employing the smartest, most capable people. As such, banks go to extreme lengths to retain their best staffers, as Barclays recently did in paying out large bonuses to U.S. investment bankers. If they lose their top talent, the whole ship may sink, goes the theory. Or maybe that’s just what they want people to think.
In a scathing yet illuminating op-ed in the Financial Times, former Cazenove CEO Robert Pickering attempts to dismantle the fallacy, as he sees it, that banks need to throw money at investment bankers to keep them from leaving, and from keeping the bank from plummeting down the league tables.
Pickering recounts tales of continually being “held at gunpoint” from investment bankers who threatened to jump to a competitor – “usually for Goldman Sachs and invariably for ‘twice what they get here,” he writes. After a few years, he realized – whether he paid to keep them or not – the bank carried on. It found new people who were equally smart and competent.
In perhaps his best example, Pickering references a showdown in the early 2000s where his predecessor was told that “the very survival of our 200-year-old firm” laid with a wunderkind banker in his 20s who was threatening the leave. Cazenove did what many other banks have done and likely will continue to do. They offered to make him a partner. He left anyway.
“A few years later, I reminded my senior management team of this incident and none of us, myself included, could remember his name,” Pickering said.
The timing of the op-ed is far from random. Pickering, a Barclays shareholder, is non-too-subtly bashing the U.K. bank for increasing bonuses despite a drop in profit. Barclays Chief Executive Antony Jenkins has said repeatedly that the bank had no choice – it couldn’t rebound from the mass defections that likely would have resulted without the pay raises. Leaving bankers unhappy would have created a “death spiral,” he said.
Pickering respectfully disagrees. “What is remarkable when considered dispassionately is not how fragile these businesses are but how resilient,” he wrote. Or maybe he’s just another angry shareholder.
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Quote of the Day: “It is possible that Mr. Jenkins will prove his doubters wrong and come out on top, but from my armchair it looks like an unequal fight and my money would be on the investment bankers.” – Robert Pickering