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.”
New York Times
Alan Johnson, founder of Johnson Associates, said many in the industry had been anticipating a rebound. This year, though, those hopes have been fading.
“We kept expecting next year will be the year,” he said. “And it hasn’t really happened — and I don’t see it for the next three to five years.” He added, “It’s hard to see the swell of demand that will bail us out here.”
Big banks and brokerages slashed their bonus pools last quarter after pitiful trading activity led to double-digit revenue declines. Unless things turn around — and soon — Wall Streeters will see shrunken bonuses and possible layoffs, experts said.
“The sun could shine brightly the rest of the year, but most people would be quite surprised if that happened,” says Alan Johnson, a compensation consultant for Wall Street brokerages. Johnson warned that bonuses could be down as much as 10% this year — followed by job cuts next year — if trends continue.
Banks “are starting to restructure their pay strategy because five or six years after the crisis they have extra costs,” Johnson said. “It’s just not working.”
“You’re in business to benefit shareholders, so you should ride up and down based on how the stock does,” said Alan Johnson, an executive compensation consultant at Johnson Associates in New York. “We want our executives in America under pressure. That’s a good thing.”
Wall Street bonuses won’t be paid until the beginning of 2016, but the people who track them are already predicting a windfall for the investment bankers who advise companies on corporate combinations. In fact, they’re predicting it’ll be the biggest payout in years. Alan Johnson, one of Wall Street’s top compensation consultants, estimates that overall compensation for mergers and acquisitions bankers could be up by as much as 50% this year.
“Since the financial crisis, their CEO pay has come down, and their median employee pay is generally high,” Alan Johnson, managing director of compensation-consulting firm Johnson Associates, said about financial-services companies. “They don’t have a lot of seasonal workers — they have a lot of full-time versus part-time workers. Their ratios will not be as high as people expect.”
When companies begin to disclose CEO-to-worker pay comparisons in 2017, it could demonstrate that women CEOs have more reasonable ratios. But it may more likely be the case that firms with higher proportions of women employees will have more eye-popping numbers.
“I think that’s likely to be true. The way the ratio is calculated, it’s intended to skew and make companies that employ a lot of part-time workers look worse,” Johnson said. “So I would think in some industries — fashion retailing, fast food, some of the big department stores — they employ not only a lot of women, but a lot of part-time women.”