Where would you rather work? Somewhere at which your cash bonus will be restricted to £65k, fin d’histoire, or somewhere where you can earn £346k in clean cash?
BarCap has the initial, unappealing, compensation structure. Credit Suisse has the second.
BarCap’s nastiness may be somewhat mitigated by the fact that half its deferred bonuses appear to vest in 2012. But still. Credit Suisse is being strangely generous.
How generous is shown in the table below, taken from Credit Suisse’s new compensation report: you can earn CHF500k (£347k) at Credit Suisse and you will only 30% of that deferred – in other words, you’ll get £243k in cash.
Similarly, you can earn up to CHF1m (£693k) at Credit Suisse and only have 50% of it deferred. CS bankers are cash rich.
This is all the more exciting what with the state of play at Deutsche Bank. Deutsche also released its compensation report the other day, and it wasn’t great.
Firstly, Deutsche is deferring 70% of everything more than €50k.
Secondly, Deutsche has decided to define all its MDs in the investment bank as risk takers, thereby making it necessary to pay them in accordance with EU rules and defer at least 40% of their compensation. As a result, Deutsche now has 1,363 ‘risk takers’ (up from 168 in 2010). Credit Suisse has 487.
And thirdly, Deutsche has a horrible clawback under which the entirety of the bonus due to vest in a particular year will be removed in the event of a €1 loss at either divisional or company level.
By comparison, Credit Suisse bankers have to make rather a large loss before they’re afflicted by a meaningful clawback, as evidenced by the chart below.
Despite being in no real position to pay anyone after achieving a cost income ratio of 105% in the investment bank in the fourth quarter, Credit Suisse is also being more generous than the likes of Deutsche and UBS. While those banks paid their code staff an average of £1.1m last year, CS allocated £1.3m.
However, Credit Suisse’s compensation structure isn’t totally chill. Some elements are likely to cause apoplexy.
Notably, just under a third of last year’s bonus pool was formed of PAF2 units, given to 5,500 senior employees at the investment bank.
These can be clawed back in their entirety in the event at recipient leaves for a rival bank within three years of their issue date.
Worse: they have a maturity of four years, but this can be extended to 9 years, “at the decision of either the group or the holders acting collectively.” It’s hard to see the holders agreeing to an extension, but at some point in the next 4 years Credit Suisse might decide to defer a third of 2011 bonuses for 9 years instead of four. That doesn’t sound good, even if there was a lot of cash to make up for it.