In theory, Deutsche Bank is an amazing payer. When you look at average compensation per head in its corporate and investment bank, it appears to pay considerably more than anywhere else.
Hence, in 2011 average pay per head at Deutsche CIB was €333k ($439k). Average pay per head at Goldman (which continues to defy gravity on compensation), was $367k last year. At JPMorgan it was only $342k.
And yet, as we’ve pointed out before, Deutsche doesn’t really pay unusually well. Its compensation figures are flattered simply because it doesn’t count all its infrastructure and operations staff as employees of its corporate and investment bank. If they were all added in, average pay per head would probably fall substantially.
Today, we have proof of Deutsche’s lack of exceptionalism when it comes to pay.
The bank has issued its 2011 remuneration report. This reveals that it paid each of its 1,250 ‘risk taking’ corporate and investment banking staff (the equivalent of FSA code staff in European terms) an average of €1.3m (£1.1m) in 2011.
Strangely, this was identical to UBS.
The average risk taker at Deutsche is getting a salary of €312k and a bonus of €988k. 84% of the bonus will be deferred and 42% of it will comprise deferred equity.
Notably, 92% of the average ‘risk taking’ bonus at Deutsche will be subject to clawback. And clawbacks will be imposed if either the bank as a whole makes negative net income before tax, or if a risk taker’s respective division does.
Deutsche points out that these clawbacks are more punitive than they used to be: in the event of a divisional or company-wide loss, 100% of all the bonuses due to vest in a particular year will be removed.
However, whilst this punitive clawback may seem good for Deutsche’s shareholders, it could be bad for the bank’s culture. Fearing the removal of that year’s deferred bonuses in the event of a loss, each individual Deutsche risk taker is now incentivised to ensure non-productive employees are dispensed with in the interest of protecting his/her bonus.
This is interesting in the wake of the letter written by former Goldman partner Jacki Zehner last Friday. Zehner noted that in the Goldman of the past it wasn’t just top producers who were promoted, it was, “amazing positive culture carriers,” who were, “less strong commercially.” This helped create Goldman’s wondrous culture, she claimed: too much emphasis on commercial alone is bad.
At Deutsche, emphasis on commercial has now been codified at the grassroots. This could prove counterproductive in the long term.