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 and Merrill Lynch International, have therefore only just provided their disclosures for 2012. We’ve already reported upon how much they paid overall. Here’s a more complete guide to the way those payments were structured.
There are a few quick conclusions to be drawn from the data below:
- Citigroup Global Markets pays incredibly high salaries.
- Goldman Sachs International pays incredibly high cash bonuses.
- If you want a sign-on bonus, try Bank of America in London.
- 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…
1. Pay at Goldman Sachs International (in 2012)
Who decides pay? Remuneration committee includes - James A. Johnson (Chair), M. Michele Burns, Claes Dahlbäck, Stephen Friedman, William W. George, Lakshmi N. Mittal, James J. Schiro, Debora L. Spar, Adebayo O. Ogunlesi and Mark E. Tucker.
Which external pay consultant does Goldman use? Semler Brossy Consulting Group LLC
Criteria used to determine pay at Goldman’s investment bank? Pre-tax income, lost business, revenue and backlog, client team and activity, relationship lending history, principalling, key transactions, as well as franchise accretion. Individuals are also judged using 360 degree assessments, which include reviews of ‘assessments of risk management, reputational judgment and compliance with firm policies, as well as teamwork, citizenship and communication.’
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: 115.
Average salary (‘fixed remuneration) paid to each member of UK code staff in 2012: $749k (£455k).
Average non-stock (cash) bonus paid to each member of UK code staff in 2012: $1m (£610k).
Average value of restricted stock bonus paid to each member of UK code staff in 2012: $2.9m (£1.8m) – based on share price of $130 in early January 2013.
Total value of sign-on bonuses paid during 2012: $1.1m (£670k).
Highest value sign-on bonus paid during 2012: $0.8m (£486k).
2. Pay at JPMorgan in the UK (in 2012)
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? Among other things, JPM takes into consideration integrity, compliance, customer relationships, training, building better systems, innovation, and performance feedback from multiple sources. Performance is based on realized profit and risk-adjusted returns. JPM benchmarks pay against Goldman Sachs, Morgan Stanley, Citi, Barclays, Credit Suisse, Deutsche, UBS and others.
Deferral policy? JPM pays a combination of restricted stock units (RSUs) and stock appreciation rights (SARs) – which are similar to stock options. RSUs vest over three years, but vesting is skewed towards year 3 (50% vest after two years and 50% vest in the third year). SARs vest equally over a five year period (20% per year), but shares received upon exercise must be held for at least five years after the grant date.
Number of code staff in the UK: 126
Average salary (‘fixed remuneration) paid to each member of UK code staff in 2012: $526k (£326k).
Average non-stock (cash) bonus paid to each member of UK code staff in 2012: $594k (£361k)
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2012: $2.3m (£1.4m).
Total value of sign-on bonuses paid during 2012: Zero.
3. Pay at Citi UK (in 2012)
Who decides pay? The Personnel and Compensation Committee (P&C Committee) - Michael E. O’Neill (Chairman), Joan Spero, Diana L. Taylor, William S. Thompson, Jr. and Ernesto Zedillo.
Which external pay consultant does Citi use? Cook & Co.
Criteria used to determine pay at Citi? ‘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 pays deferred bonuses in a number of forms. These include a stock award which vests immediately and is subject to a 6 month retention period and stock awards which vest over a minimum three year period and are subject to a further six month retention period.
Number of code staff in the UK: 190 (only 93 are in Citigroup Global Markets)
Average salary (‘fixed remuneration) paid to each member of UK code staff in 2012: $834k (£507k). In Citigroup Global Markets, salaries are higher at an average of £603k for non-executive level code staff.
Average non-stock (cash) bonus paid to each member of UK code staff in 2012: $377k (£229k)
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2012 (includes vested outstanding and deferred pay): $2.63m (£1.6m)
Total value of sign-on bonuses paid in 2012: £4.36m.
Other things of note: Citi doesn’t allow accelerated vesting to employees who are terminated – your Citi stock only vests on an accelerated schedule if you die.
4. Pay at Bank of America in London (in 2012)
Who decides pay? Various compensation committees…
Which external pay consultant does BAML use? 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 6 months after vesting.
Number of code staff in the UK: 121
Average salary (‘fixed remuneration) paid to each member of UK code staff in 2012: $388k (£236k).
Average non-stock (cash) bonus paid to each member of UK code staff in 2012: $447k (£272k).
Average value of deferred stock and deferred cash bonus paid to each member of UK code staff in 2012 (includes only up-front equity-linked awards and long term equity linked awards for 2012- not total unvested pay ): $1.6m (£988k).
Total value of sign-on bonuses paid in the UK in 2012: £8.4m.