hurricanemaxi
Joined: 10 Aug 2011
Posts: 120
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 Posted: Tue Jan 10, 2012 6:50 am Post subject: Wall Street Weighs Pay Freeze for Junior Bankers |
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Wall Street’s biggest firms, facing a slump in investment-banking revenue, are considering freezing compensation levels for some junior bankers, according to people familiar with the deliberations.
Credit Suisse Group AG (CSGN) is likely to suspend its practice, an industry norm, of boosting pay automatically each year for analysts, associates and vice presidents within the investment- banking division, a person with direct knowledge of the decision said. While those employees will get their regular annual salary increases, bonuses probably will be lowered to keep total pay flat from a year earlier, said the person, who requested anonymity because the plan isn’t public.
Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) are being watched by competitors for signs the companies are planning similar moves, said people at four other firms. Cutting pay can be perilous if your rivals don’t because it’s easier for junior bankers to defect, draining a future generation of talent. Wall Street firms may make the change en masse only if one or more of their biggest rivals act first, the people said.
“There’s always the risk that people may go across the street for a better deal,” said Joseph Sorrentino, a managing director in New York at Steven Hall & Partners, an executive- compensation consultancy. Among junior bankers “you have some potential future stars and you want to make sure you keep them engaged and keep them happy and performing.”
JPMorgan, which doesn’t plan to alter its practices, may change course if other firms do so, a person briefed on its decisions said.
Starting Salaries
Base pay for junior bankers typically increases automatically by about 15 percent to 20 percent, akin to a unionized salary scale, as they work a year and move up a so- called class. Younger bankers, who typically comprise about 75 percent of the investment-banking workforce of the biggest Wall Street firms, often start with a $200,000 annual salary and can expect $240,000 or $250,000 in the second year, said two senior bankers.
JPMorgan’s investment bank, which includes equity and fixed-income trading, had 26,615 employees as of Sept. 30. Goldman Sachs, with 34,200 employees, doesn’t break out how many work in each division.
A banker typically spends three to four years as an associate and then three years as a vice president before he can be named director. Top-producing vice presidents in their third year, sometimes called a VP-3, could get $600,000 to $700,000 in total compensation, said a senior Wall Street banker.
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