Wondering how much ‘risk takers’ are paid at leading banks in the City of London? By virtue of the British BIPRU rules on remuneration disclosure, you need not wonder too long. Introduced after the financial crisis, the rules state that all investment banks operating in London must disclose everything from the amounts they pay their risk takers to the structure of that compensation and their efforts to lure new hires with sign-on bonuses.
Most banks provide these disclosures a year after payments were made. Goldman, JPMorgan, Citi, Bank of America and Morgan Stanley have therefore only just provided their disclosures for 2013. We’ve already reported upon how much they paid overall. Below, we have a more complete guide to the way those payments were structured. Notably, banks may be required to modify payment methods for 2014 in order to adhere to the EU bonus cap.
There are a few quick conclusions to be drawn from the data below:
- Citigroup Global Markets still pays incredibly high salaries.
- Goldman Sachs International pays incredibly high cash bonuses AND quite high salaries.
- If you want a sign-on bonus, you really need to try Bank of America in London – or failing that, Citi.
- Bank of America has the best (shortest) deferral policy, but pays comparatively badly overall.
- Banks have been using a little-known pay consultancy firm, Frederic W Cook & Co, to work out how to compensate employees.
- Despite EU rules that bonuses need to be no more than twice salaries for code staff, most banks paid bonuses far higher than this in 2013. Both Goldman Sachs and Citi actually cut their average salaries during the year.
- US banks have hardly any code staff in London anyway.
1. Pay at Goldman Sachs International (in 2013)
Who decides pay? Goldman Sachs’ remuneration committee includes – James A. Johnson (chair), M. Michele Burns, Claes Dahlbäck, William W. George, Lakshmi Mittal, James J. Schiro, Debora L. Spar, Adebayo O. Ogunlesi and Mark E. Tucker. None of them are employees of the bank.
Which external pay consultant does Goldman use? Semler Brossy Consulting Group LLC
Criteria used to determine pay at Goldman’s investment bank? At the business area and individual level, Goldman looks at pre-tax income, lost business, revenue and backlog, client team and activity, relationship lending history, principalling, key transactions, as well as franchise accretion. At the firm-wide level, it takes into consideration ROE, diluted earnings per share, book value per share, net earnings, net revenues, spending on compensation, the proportion of revenues that are spent on compensation, and non-compensation spending.
Deferral policy? Stock bonuses are deferred over three years, with amounts vesting equally on the first, second and third anniversaries of the award date. However, even after stock bonuses have vested, individuals are also required to retain a ‘material portion’ of restricted stock units for up to five years.
Number of code staff in the UK in 2013: 121 (compared to 115 in 2012).
Average salary (fixed remuneration) paid to each member of UK code staff in 2013: $721k (£471k). Down from $749k in 2012.
Average non-stock (cash) bonus paid to each member of UK code staff in 2013: $879k (£574k). Down from $1m in 2012.
Average value of restricted stock bonus paid to each member of UK code staff in 2013: $3.4m (£2.2m) (based on current share price).
Total value of sign-on bonuses paid during 2013: Zero. This compared to $1.1m (£670k) in 2012.
Highest value sign-on bonus paid during 2013: Zero. This compared to $0.8m (£486k) in 2012.
Other items of note: In 2013, Goldman specially asked Semler Brossy to look at pay for its partner MDs.
2. Pay at JPMorgan in the UK (in 2013)
Who decides pay: The Compensation & Management Development Committee.
Which external pay consultant does JPM use? Not stated.
Criteria used to determine pay at JPMorgan’s investment bank? JPM takes into consideration business results, achievement of client/customer goals, people objectives and risk and control outcomes.
Deferral policy? JPM used to pay a combination of restricted stock units (RSUs) and stock appreciation rights (SARs – similar to stock options), but now it only pays RSUs. RSUs vest over three years, but vesting is skewed towards year three (50% vest after two years and 50% vest in the third year).
Number of code staff in the UK: 209 (up from 126 in 2012)
Average salary (fixed remuneration) paid to each member of UK code staff in 2013: $455k (£297k). Compared to £326k in 2012.
Average non-stock (cash) bonus paid to each member of UK code staff in 2013: $404k (£264k). Compared to £361k in 2012.
Average value of deferred cash and stock and ‘withheld cash': $1.47k (£962k). Down from $2.3m (£1.4m) in 2012.
Total value of sign-on bonuses paid during 2013: Zero. They were also zero in 2012.
Other items of note: JPMorgan has a fearsome clawback policy. It’s already able to demand that stock bonuses which have already vested (and maybe already been spent) are repaid if they’re found to have been paid incorrectly.
3. Pay at Citi in the UK (in 2013)
Who decides pay? In Europe, pay at Citi is decided by the ‘EMEA Remuneration Committee.’ This comprises the EMEA CEO and EMEA chief admin officer, along with members of risk, compliance, human resources, legal, and finance, and a non-exec director.
Which external pay consultant does Citi use? Cook & Co.
Criteria used to determine pay at Citi? At the individual level, Citi rewards staff for ‘common purpose’, ‘ingenuity’ (defined as ‘enhancing our clients’ lives through innovation that harnesses the breadth and depth of our information, global network, and world-class products,’) ‘leadership’, and ‘responsible finance.’
Deferral policy? Citi’s deferred compensation usually pays out over four years. Pay for code staff (UK regulated staff) is deferred for three years and then subject to a further 12 month holding requirement.
Number of code staff in the UK: 182, of which only 95 are in Citigroup Global Markets. This compares to 190 in 2012 (of which only 93 were in Citigroup Global Markets).
Average salary (fixed remuneration) paid to each member of UK code staff in 2013: $802k (£524k), down from $834k in 2012. In Citigroup Global Markets, salaries are even higher at an average of £608k for code staff.
Average non-stock (cash) bonus paid to each member of UK code staff in 2013: $263k (£172k). Down from $377k (£229k) in 2012.
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff for 2013 (includes vested outstanding and deferred pay): £660k ($1m). Down from £775k in 2012.
Total value of sign-on bonuses paid in 2013: £2.14m, down from £4.36m in 2012.
4. Pay at Bank of America in London (in 2013)
Who decides pay? Various compensation committees.
Which external pay consultant does BAML use? Frederic Cook & Co.
Criteria used to determine pay at BAML? Financial performance and non financial performance. Financial performance includes corporate-wide measures, line of business, product results. Non-financial measures include: quality and sustainability of earnings, successful implementation of strategic initiatives, adoption of risk culture/adherence to risk framework and other ‘core values and operating principles.’ Overall, employees receive two ratings: a results rating based on objective metrics and a behaviour rating, based on subjective things like leadership and teamwork. The scale for both ratings is ‘Exceeds Expectations, Meets Expectations, and Does Not Meet Expectations.’
Deferral policy? BAML pays some short-vesting ‘equity linked awards’ which become cash after three months. Longer term equity-based pay awards are deferred over three years and must be retained for a further six months after vesting.
Number of code staff in the UK: 110. Down from 121 in 2012.
Average salary (fixed remuneration) paid to each member of UK code staff in 2013: $396k (£259k). Up from $388k (£236k) in 2012.
Average non-stock (cash) bonus paid to each member of UK code staff in 2013: $455k (£297k). Up from $447k (£272k) in 2012.
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2013: $1.7m (£1.1m). Up from $1.6m (£988k) in 2012.
Total value of sign-on bonuses paid in the UK in 2013: £12.7m, up from £8.4m in 2012.
5. Pay at Morgan Stanley International (in 2013)
Who decides pay? The Compensation, Management Development and Succession Committee.
Which external pay consultant does Morgan Stanley use? Not stated.
Criteria used to determine pay at Morgan Stanley? On an individual basis, Morgan Stanley looks at contribution to revenue and profitability (whilst taking risk into account), at teamwork, management abilities (including the ability to attract and retain core talent), at technical skills, adherence to core franchise values and business principles and policies and at market conditions.
Deferral policy? Morgan Stanley pays deferred cash bonuses spread over three years. It also pays stock bonus awards which vest after six months and Long Term Incentive Programme Awards which vest after four years – but only if minimum performance conditions relating to the company’s stock have been met.
Number of code staff in the UK? 116.
Average salary (fixed remuneration) paid to each member of UK code staff in 2013: $600k (£392k.)
Average non-stock (cash) bonus paid to each member of UK code staff in 2013: $234k (£153k).
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2013 (includes money awarded for 2013 and previous years’ awards as they vested): $1.7m (£1.1m)
Total value of sign-on bonuses paid in the UK in 2013: Zero.