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Raise Bankers' Salaries?
Mar 31 2009
Bank of America reportedly plans to raise investment bankers' base pay by 60-70 percent soon.
Is that wise in today's climate? Should other major banks take similar steps, as B of A suggests they will?
B of A's reported plan would make the fixed salary a larger part of total compensation (which would not rise, according to the bank) and would bring salaries at the parent closer to those at Merrill Lynch, which the bank acquired last year.
But the most important reason behind restructuring compensation may be political. A memo from B of A investment bank division President Brian Moynihan, quoted by Bloomberg News, reads in part: "In view of the public concerns about executive compensation, changes in the market and the need to create a more sustainable compensation culture, all the major financial institutions are evaluating compensation practices."
It appears that BofA is trying to appease employee constituencies who are threatening to leave the corporation because, due to the uncertain impact of market conditions on the returns they generate for the bank and its shareholders, their performance-related pay might be in jeopardy.
If anything, performance and pay need to be more closely linked than hitherto, if shareholders are to get their money's worth of returns.
Alexander 01 Apr 2009
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