Pandemic on Wall Street Raises Levels… of Bonuses | Executive compensation and bonuses

JWhile most of us are feeling the effects of soaring inflation, which the Office for National Statistics said last week peaked 5.1% in 10 years, wealthy bankers and traders look forward to receiving extraordinarily large bonuses for the New Year.

Banks on both sides of the Atlantic are finalizing bonus pool deals that could be inflated up to 50% from last year, reaching their highest levels since 2009 and the M&A boom that followed the financial crisis.

The best investment bankers in the United States – the “masters of the universe” – can expect to raise $ 5-10 million (£ 3.7-7.5 million) this year, depending on the market. compensation experts. The huge salary is due in part to the damage caused by the pandemic, as the crisis has forced a wave of takeovers and mergers.

Banks advising on such deals – which include US private equity firm Clayton, the £ 7bn buyout of Morrisons by Dubilier & Rice and the £ 20bn purchase by the London Stock Exchange from Reuters owner, Refinitiv – receive a percentage of the total transaction for their problem. They also receive fees for advice on IPOs, private equity buyouts and debt offers.

In addition to the wave of mergers and acquisitions (M&A), the number of initial public offerings (IPOs) also increased by 64% worldwide to reach 2,388 in 2021 compared to 2020, according to a study by Ernst & Young.

The biggest gains are expected in the United States, where deals closed so far this year have totaled $ 2.3 trillion – a record, according to data from Refinitiv.

Goldman Sachs, which had already raked in $ 11 billion in fees at the end of September, is expected to increase its bonus pool by 50%, while rival Wall Street bank JP Morgan may inflate its bonuses by 40%, sources say last week .

David Solomon, chief executive of Goldman, told staff when the bank’s results were announced in October that they could expect exceptional bonuses. “We’re a pay-for-performance culture, and there’s no question people perform,” said Solomon, who moonlights as a club DJ under the stage name D-Sol.

Solomon, who swallowed a $ 10 million pay cut in January following the 1MDB scandal in Malaysia, received a stock bonus worth up to $ 30 million payable in 2026. The bank said the awards “ensure continuity of leadership” and “improve retention in response to the rapidly escalating talent war.”

JP Morgan awarded CEO Jamie Dimon a “special award” of 1.5 million stock options this summer, which could be worth up to $ 49 million over 10 years.

Last week the largesse was extended to Daniel Pinto, chief operating officer and chairman of the bank, who is seen as Dimon’s most likely successor. He received a “retention planning” stock award worth up to $ 25 million in addition to his salary of $ 24.5 million in 2020.

While they might not collect bonuses as big as their New York cousins, hundreds of London bankers will also be making millions when bonus season hits in early January. Some of the city’s luxury car dealers say they are preparing for possible big wallet splurges by increasing inventory availability.

Boutique bankers are expected to be the biggest beneficiaries in London, as regulations introduced after the 2008 financial crisis prevent big banks from offering bonuses of more than 100% of fixed salary (or double with shareholder approval. ).

The smaller in-store advisors, mostly based in Mayfair, are not covered by the rules and have regularly paid huge sums.

Robey Warshaw, the bank that former Chancellor George Osborne joined as a partner this year, paid out £ 207million in profits to his three partners (before Osborne joined to make four) over the past years. past six years, according to accounts filed with Companies House. Sir Simon Robey, the majority shareholder who has been described as the city’s ‘trillion dollar man’ for the cumulative size of the mega-deals he worked on, raised just £ 137million over the past seven years.

The company has yet to file this year’s accounts, but Robey is among the advisers appointed under the deal with LSE to buy Refinitiv, in which bankers, lawyers and other advisers are expected to collectively earn £ 830million. .

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