Don't fret over the bonus
By Clancy Yeats | smh.com.au | 03 October
As the credit crunch claimed more scalps and sent sharemarkets deeper into the red, investment bankers came to grips with the reality that holding their jobs will be more important than maximising their pay, industry experts say.
During boom times, bonuses often multiply the six-figure salaries of investment bankers many times over, as they give staff a cut of the profits. But with companies struggling under falling asset values and a crisis of confidence, a bonus of 50% once regarded as meagre is far more than many can hope for.
And bonuses aside, the trend points to potentially larger economic risks facing the financial sector.
Patrick Everest, a partner at specialist financial recruiter Jon Michel Executive Search, said that given the dire state facing many in the highly leveraged investment banking sector, slashes to pay packets were to be expected.
‘‘You can’t be paying people millions of dollars if you are writing off billions of dollars on the other side of the world,’’ he said. ‘‘If people get a bonus this year it will be exactly that.’’
Another specialist recruiter in the field, Luke Heath from Chandler Heath Recruitment, said management was already preparing their staff for lower pay in struggling financial companies.
‘‘In two weeks’ time, it could have deteriorated to the point where people would like bonuses, but they’re still just happy to have a job,’’ Mr Heath said.
Companies pay individual bonuses — a closely guarded secret between staff — at different times of the year according to when they report their annual profits.
Fortunately for staff at Macquarie Bank, this year’s bonuses were determined by the bank’s performance to March 30, before the latest stage of turmoil. The biggest decreases are expected when the highly leveraged international investment banks pay their bonuses early next year.
Of the less vulnerable deposit-taking banks, Commonwealth Bank records profits until the June 30 year while the other ‘‘big three’’ use September 30.
Bonuses are great, but it’s the job that counts. While there have not been lay-offs of the scale seen in London and New York, many companies have a ‘‘last in, first out’’ policy. Some young investment bankers have already been shown the door, and UBS staff have come to work to find an empty desk next to them in the past few months.
Merrill Lynch staff will be nervous after the company’s merger with American Insurance Group, though how it will affect them remains unclear.
Peter Black, a consultant at DBM Employment who helps find jobs for retrenched financial workers, said he had had a sharp increase in the number of retrenched staff. ‘‘Some of our clients are still getting jobs, albeit the salaries are lower, and their expectations are lower in terms of salaries and bonuses,’’ Mr Black said.
And as the labour market lags, businesses dependent on discretionary spending are the first to feel the pinch.
The owner of a yacht business in Sydney said this year was the worst he had seen in almost 20 years.
Originally published September 23, 2008
First published by Smh.com.au on October 03 2008
Visit smh.com.au for the latest news updated throughout the day
