Once, it was a mystery how much banks paid their top performers. - Headhunters had information as did pay benchmarking firms, but the data was always parsed through third parties. Nowadays, we know exactly how much banks pay their most valued staff in London by virtue of the British BIPRU rules on remuneration disclosure.
The BIPRU rules state that all banks operating in London, U.S. banks included, must disclose the amounts they pay their risk takers and the structure of those risk takers' compensation. These disclosures are typically made up to a year after those payments were made. Goldman, JPMorgan, Citi, Bank of America and Morgan Stanley have all now lodged their disclosures for 2016, meaning we know exactly how much they paid their most important staff over 12 months ago. The pertinent data from each bank's filing is shown below. Bonus figures are only for bonus awarded in 2016 and don't include earlier bonuses which vested last year.
The key takeaways are as follows:
- In response to regulatory pressure, most banks continue to increase the number of employees categorized as 'regulated staff.' As juniors are added to the regulated staff pool, this is helping to cut average pay.
- All banks pay their material risk takers a proportion of their bonuses in deferred stock. Most of these regulated staff have therefore benefited significantly from banks' increasing share prices over the past six months.
- If you want to make really big money, you need to work for Goldman Sachs. 32 people at the firm's London office earned more than €5m last year and 10 Goldman bankers earned equal to or more than €9m. By comparison, only 14 people earned more than €5m at J.P.M. and Citi Global Markets, only nine did at Morgan Stanley and only seven did at BAML... Average pay at Goldman Sachs is just average. Top pay at Goldman Sachs is anything but.
Which external pay consultant does Goldman use? Semler Brossy Consulting Group LLC
Criteria used to determine pay at Goldman’s investment bank? At the business area and individual level, Goldman looks at pre-tax income, lost business, revenue and backlog, client team and activity, relationship lending history, ‘principalling’, key transactions, as well as franchise accretion. At the firm-wide level, it takes into consideration ROE, diluted earnings per share, book value per share, net earnings, net revenues, spending on compensation, the proportion of revenues that are spent on compensation, and non-compensation spending.
Allowances to regulated staff? Yes. Goldman pays cash allowances to most regulated staff affected by the EU bonus cap (although some get stock allowances).
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 100% (after tax) of their restricted stock units for up to five years after the award date. Goldman bankers are banned from hedging against their vested shares during this period.
Number of regulated staff in the UK in 2016: 724 (compared to 512 in 2015, 529 in 2014, 121 in 2013 and 115 in 2012).
Average salary (fixed remuneration) paid to each member of UK code staff in 2016: $838k (down from $1.1m in 2015, $903k in 2014, $721k in 2013 and $749k in 2012.)
Average bonus paid to each member of UK code staff in 2016 (based on share price at the end of the year): $538k.
Average total compensation for UK code staff in 2016: $1.4m (£1m)
Total value of sign-on bonuses paid during 2016: Goldman Sachs is doing away with sign-on payments. It only made four in 2016 and the highest one comprised 4,000 restricted stock awards. This was down from 31,000 restricted stock units paid to one person in 2014.
Distribution of compensation among code staff at Goldman Sachs in 2016:
Which external pay consultant does J.P. Morgan use? Not stated.
Criteria used to determine pay at J.P. Morgan’s investment bank? Financial results, risk and control outcomes, client/customer goals (where appropriate), people and leadership objectives.
Deferral policy? J.P. Morgan doesn't provide information on pay structure for 2016, but in the past Managing Directors at the bank were subject to a 35% minimum deferral irrespective of their level of compensation. Restricted stock units vest over three years, but vesting is skewed towards the end – 50% vest in year two and 50% vest in year three.
Number of regulated staff in the UK: 672 in 2016. .(Up from 644 in 2015, 586 in 2014, 209 in 2013,126 in 2012.)
Average salary (fixed remuneration) paid to each member of UK code staff in 2016: $784k. (Up from $749k in 2015, $455k (£297k) in 2013 and £326k in 2012.)
Average bonus paid to each member of UK code staff in 2016 (based on share price at the end of the year): $737k
Average total compensation for UK code staff in 2016: $1.5m (£1.1m)
Distribution of compensation among code staff at J.P. Morgan in 2016:
Which external pay consultant does Citi use? Frederic Cook & Co.
Criteria used to determine pay at Citi? Citi's updated its criteria for awarding bonuses to staff (you can see the new specifications on page 51 here). On an individual level, it rewards people who 'develop people', 'drive value for clients,' work as partners, champion progress, live values and deliver results.
Deferral policy? Citi has also changed its deferral policies, Most bonuses are deferred for three years (down from four), but senior managers at Citi have their bonuses deferred for a full seven years. All recipients over restricted bonuses are subject to six month transfer restrictions (ie. they can't sell the stock) after the bonuses vest.
Number of regulated staff in the UK in 2016: 525 (up from 450 in 2015).
Average salary (fixed remuneration) paid to each member of UK code staff in 2016: £428k ($580k).
Average bonus in 2016: £446k ($605k).
Total average compensation for Citi UK code staff in 2016: £874k ($1.2m)
Distribution of compensation among code staff at Citi in 2015:
Which external pay consultant does BAML use? Farient Advisors LLC.
Criteria used to determine pay at BAML? BAML staff in Europe are awarded bonuses based upon their results and their behaviour. They receive a rating for each. (BAML says, "Employees receive two ratings – a Result rating (based on objective metrics such as business performance) and a Behavior rating (based on subjective metrics such as contributions to the 4 Company, leadership, conduct, teamwork, etc.). The scale for both ratings is Exceeds Expectations, Meets Expectations, and Does Not Meet Expectations.")
Deferral policy? Longer term equity-based pay awards are deferred over three years and must be retained for a further six months after vesting.
Number of regulated staff across the EU: 612 in 2016. (Up from 455 in 2015, 389 in 2014).
Average salary (fixed remuneration) paid to each member EU regulated staff in 2016: €518k ($623k).
Average bonus for regulated staff in 2016: €498k ($599k).
Total average compensation for BAML EU-regulated staff in 2016: $1.2m.
Distribution of compensation among code staff at BAML in 2016:
Which external pay consultant does Morgan Stanley use? Not stated.
Criteria used to determine pay at Morgan Stanley? On an individual basis, Morgan Stanley looks at contribution to revenue and profitability (whilst taking risk into account), teamwork, management abilities (including the ability to attract and retain core talent), at technical skills, adherence to core franchise values and business principles and policies and at market conditions.
Deferral policy? In line with UK regulations, senior managers at Morgan Stanley have a minimum seven year deferral, with vesting starting in year three, Risk managers have a five year deferral (with vesting starting in year one) and all other regulated staff have a three year deferral.
Number of regulated staff in the UK? 431 (up from 404 in 2015, 383 in 2014, 116 in 2013).
Average salary (fixed remuneration) paid to each member of UK code staff in 2016: £496k ($673k).
Average bonus for regulated staff in 2016: £550k ($746k)
Total average compensation for Morgan Stanley UK code staff in 2015: $1.4m
Distribution of compensation among code staff at Morgan Stanley in 2016:
Photo credit: dollar close UP by Shai Barzilay is licensed under CC BY 2.0.