Renowned compensation consultant Alan Johnson – who works with most big Wall Street firms – believes that financial services organisations are going to base more roles outside of New York to cut costs. Across the whole country, there will be a reduction of 50k financial services jobs over the next 12 months, Johnson predicts, with approximately 10k of those redundancies in New York. For those who keep their jobs, their pay will drop an average of 10% over that timeframe in the U.S., he said.
But the 10-digit figure shows how important big checks remain in recruiting retail brokers, despite the complaints of senior executives, said Alan Johnson, managing director of compensation consulting firm Johnson Associates.
“[Our] clients have always said that we really don’t want to do this, and then they do it as much as ever,” Johnson said. “It shows you how competitive the industry is. Firms want to attract good people, and they don’t want to lose the good people they’ve got.”
While the boards of big banks all set dollar-price targets for equity awards, some companies determine grants based on the number of shares. Alan Johnson, managing director of compensation consulting firm Johnson Associates, said he prefers a dollar target because setting a unit target could mean runaway compensation if a stock explodes in value.
“It works reasonably well, so long as you do it at the same time every year,” Johnson said. “Some people will say ‘My god, they’re getting a break, getting a low price,’ but that assumes there’s some kind of normal price.”
Wall Street Journal
The decrease is providing the first pocketbook test of the new bonus practices banks established in the wake of the 2008 financial crisis. “It’s a big deal,” said Alan Johnson, managing director of pay consultant Johnson Associates. “The business is down, the market is down, the stock is down. It couldn’t come at a worse time.”
Pensions & Investments
“Money management is doing better than other financial service firms,” he said. “People in asset management are as well paid as anybody, the culture is pretty good and the work is pretty fun.”
“Downsizing and relocation, you’re going to see both.”
Alan Johnson, Johnson Associates
The pay cuts come as Wall Street struggles with falling demand for trading and underwriting. They are also a reflection of Wall Street’s push, in the aftermath of the financial crisis, to squeeze out higher profits through aggressive cost-cutting, even as revenue has remained largely flat.
Instead, Mayer’s 2014 options were granted on Feb. 27 with a strike price of $18.87, even as the stock closed at $38.47 that day. As at many companies, the number of options she ultimately collected hinged on performance targets. Thanks to the way hers are dated, those instruments would have generated $14 million if exercised at the close of trading on Tuesday — rather than nothing.
“It’s extremely unusual,” said Alan Johnson, managing director of compensation consulting firm Johnson Associates. “It’s been a windfall for her.”
Analysis by the Financial Times shows that graduates from the world’s top 10 MBA schools are 40 per cent less likely to go into investment banking now than they were before the financial crisis.
Pay and lifestyle are the two biggest deterrents. Alan Johnson, managing director of Johnson Associates, a Wall Street pay consultant, estimates that the total pay pool across Wall Street banks will be down by about 10 per cent this year. “It’s less pay, more hassle,” said Mr Johnson.
Alan Johnson, managing director of New York compensation consultants Johnson Associates, predicts average bonuses at the big investment banks globally will be down 10% to 15% this year but with wide variation between different product areas. And he says that the gap between pay at US banks and European rivals is likely to widen.
Wall Street Journal
“It’s a disappointment,” said Alan Johnson, managing director at New York-based Johnson Associates. “It’s been such an uncertain year, a stressful year. Pay is down moderately, but it feels worse.”
The uncertain mood across the industry should continue into 2016, said Mr. Johnson, who predicted many firms would take steps to shrink their workforces again to help lift returns.
“This year will be an inflection point,” he said. “Firms are going to have to look at their cost structures again.”