Still, don’t bash Amazon. “It just makes you look desperate,” Johnson said.
“Decades ago, employers took a broader sociological view to determine if the real wages of their employees were going up over time,” says Johnson. “Now, employers see wage growth as something out of their control. They may be reasonably competitive with wages or benefits, but it may only be okay for employees, not great. And they think ‘I can’t do much about it because it’s out of my control.’ ”
Human Resources Executive / August 22, 2018
“At the next board meeting, people will be talking about it,” says Alan Johnson, founder of Wall Street compensation consulting firm Johnson Associates. “It will be front of mind.”
It’s possible, though, that if the company regains market value, “by the end of the year, these days might be forgotten or it may have not really happened,” Johnson says.
Agenda / August 20, 2018
“The industry has been on a fundraising and realization high,” Alan Johnson, managing director of Johnson Associates, said of private equity.
eFinancialCareers / August 3, 2018
“It’s going to be challenging to manage people’s expectations,” he said in an interview. “As we get toward the end of the year I think people will expect to get paid more than they will. How do you manage people who get 5 percent more but maybe they were thinking they would get 10 to 15?”
Bloomberg News / August 3, 2018
Compensation Consultant Alan Johnson of Johnson Associates in New York said the potential 3% grid-rate bump is, nevertheless, “dramatic” enough to get advisors’ attention.
“Three points is a lot,” said Johnson when briefed on the details of the plan by a reporter. “Morgan Stanley is signaling that [financial plans and asset gathering] are important to the client, to the business and to the advisor, and whether you agree or not, we’re moving significantly in this direction.”
Advisor Hub / July 30, 2018
Bonuses Are About to Soar Across Wall Street – And a Group Left for Dead Might Wind up the Biggest Winner
Johnson said he expected equities “to be up for the rest of the year,” but not on par with the “euphoric trading” of 2007 and 2008.
“This is not your grandma’s trading. This is a more constrained, client-driven trading,” Johnson said. “We won’t see perhaps the profits we saw before the crisis.”
Business Insider / May 10, 2018
“The mantra is hedge funds should make more money in volatile markets, that’s always been their elixir,” Johnson said. “That’s not as automatic as it once was.”
Johnson Associates bases bonus estimates on first-quarter results and conversations with clients. The forecasts often change throughout the year.
Bloomberg News / May 9, 2018
“They’re just going to go to the salary they wanted to do in the first place,” said Alan Johnson, a financial compensation expert who runs the consulting firm Johnson & Associates. “The only reason you would change it because of the tax law is because you never believed in bonuses.”
CNN Money / April 23, 2018
Similarly, Alan Johnson, managing director and founder at Johnson & Associates, suggests these pay disclosures may be only the beginning. For example, consider the gender pay gap information that companies are being required to disclose in the U.K. this year, he says.
“I think we’re going to have ratios like this in different states in the U.S. that people are going to be required to disclose. Investors are asking about some of these things,” Johnson says.
Agenda / April 9, 2018
Firms are demonstrating willingness to give hefty pay boosts to particularly talented young tech experts. However, “these big jumps are still cheap relative to the much bigger compensation packages required to retain more-senior employees,” said Johnson Associates managing director Francine McKenzie in the report.
“Even with the recent market volatility, we continue to forecast a positive outlook for 2018 asset management compensation, which would build on the significant pay levels delivered in 2017,” she told Money Management Executive, while noting the trajectory could change if there is a sustained and deep downturn.
“With increased market and sector volatility, we are likely to see more outliers, depending on strategy and focus, than we did in 2017, where many boats rose in tandem with the market,” she says. “Those in the industry that would especially benefit from volatility would be the large brokers whose advice and guidance during turbulence is often sought.”
Overall, she adds, despite the challenges, “large asset management firms are well- managed, positioned and structured, and will continue to offer real career and compensation opportunities.”
Financial Planning / April 9, 2018
Boards have oversight of retirement plans, but not at a deep level. They generally leave it to management, says Alan Johnson, managing director of compensation consulting firm Johnson Associates. That may be one reason why participation is low at many companies. “I think most companies have looked at 401(k)s as kind of a hygiene factor. You’ve got to have one and it needs to be reasonably competitive,” Johnson adds. “but if you’re well beyond the (minimum), it may not be a good use of (corporate) money.”
Agendaweek.com / March 19, 2018
“Getting zero bonuses was unheard of a couple years ago, but it happens today,” said Alan Johnson, head of compensation consulting firm Johnson Associates.
“I expect that there are people who will get no bonus” this season, he added.
Reuters / January 19, 2018
But compensation experts say the change in tax law is not likely to reverse years of upward pressure on executive pay. If anything, companies are likely to make such pay less dependent on performance-based bonuses and give executives a higher salary, they say.
“Some people will hope this reduces executive pay; I don’t think it will,” said Alan Johnson, managing director of pay consultant Johnson Associates.
Washington Post / January 3, 2018
“The impact of getting rid of the deduction of state and local taxes is a tipping point for New York, Boston and California as people look at where to create jobs and put people,” Johnson says. “The exodus of people [from expensive cities in states with high taxes] will accelerate, and that’s going to have a big impact on financial services.”
eFinancialCareers / December 6, 2017
Alan Johnson, the founder of compensation consulting firm Johnson Associates, says that pay is typically 15%-20% less in locations outside of New York where banks are moving jobs. However, the lower cost of living often makes up the difference.
eFinancialCareers / November 15, 2017
“A strong stock market and a favorable political and regulatory environment are contributing to one of Wall Street’s healthiest years recently,” said Alan Johnson, managing director at Johnson Associates.
Crain’s New York Business / November 13, 2017
Alan Johnson, managing director of Johnson Associates, attributed the rise in expected bonuses to “a strong stock market and a favorable political and regulatory environment” in a news release announcing the firm’s estimates.
Pensions & Investments / November 13, 2017
“A strong stock market and a favorable political and regulatory environment are contributing to one of Wall Street’s healthiest years,” Alan Johnson, managing director of Johnson Associates, said in a statement. “As a result, incentives will be up noticeably, especially in asset management and investment banking.”
MarketWatch.com / November 13, 2017
For the first time in four years, year-end bonuses for bankers in 2017 are set to grow over the prior year, according to consulting firm Johnson Associates Inc. Over all, incentive pay is expected to rise by 5% to 10%, Johnson’s survey found.
Alan Johnson, who runs Johnson Associates and helps banks design compensation programs, said that Washington’s shift toward a softer tone on banks is a big factor in their improving stock prices, which is in turn a big driver of bonuses.
Wall Street Journal / November 12, 2017
And one compensation consultant doesn’t believe the new law will help achieve its intended goal. Mr. Johnson remains unconvinced that the New York law will have the desired impact on the money management industry, but instead will drag out an already belabored recruiting process.
“I don’t think it’s going to narrow the gap. But politicians want to believe compensation (in the money management industry) is driven by discrimination and not the market,” said Mr. Johnson. “I don’t think it’s going to have a positive impact.”
Mr. Johnson added he believes the law will simply “make the recruiting process more cumbersome (and) more drawn out.”
Pensions & Investments / October 30, 2017
“I think at the big programs, that’s a fair estimation,” he says. “They run a pretty big operation. They’re responsible for a lot of money. It’s an extraordinarily competitive business. So, yeah, they certainly look much more like a CEO than they did 20 or 50 years ago, in simpler times when the money was not as big.”
USA Today / October 25, 2017
That said, Alan Johnson, managing director of compensation consulting firm Johnson Associates, pointed out that the level of director pay is set in a competitive marketplace and has actually grown at a slower pace than that of company executives.
“The real issue is the income growth of the middle [class] has been sluggish,” Johnson told CNBC in a phone interview. “We have to grow our economy so the middle-class American will feel better.”
CNBC.com / October 18, 2017
“It will actually be worse than it was before – the problems that it was intended to cure will get worse,” Johnson says. “[Recruiters] can certainly ask their salary expectations, and the better the negotiator you are, the further you’ll get with that, but the truth is, most candidates don’t really know [how much they should be paid].
eFinancialCareers / September 13, 2017
Another issue to consider is how executives and potential recruits will react if the clawback provisions are viewed as too onerous, unclear or open-ended, says Alan Johnson, a New York–based executive compensation consultant. A potential worry for executives could be that “five years after I’m gone there will be a witch hunt, and they’re going to call me the witch,” Johnson says.
AgendaWeek / August 21, 2017
“He’s done a great job, but the standards to earn it are way too easy,” says Alan Johnson, managing director of New York-based compensation consultancy Johnson & Associates. “You’re going to get paid an enormous amount of money if you finish in the top third of the race? Really?”
MarketWatch.com / August 16, 2017
“Regulatory and political unknowns continue to spread caution throughout the industry,” Johnson said in the report. “Market activity and interest rates will be key 2017 incentive drivers going forward.”
Bloomberg.com News / August 9, 2017
“The rules never really got a full debate, so I don’t think it’s a bad thing that they have been killed, because I think the pendulum has swung too far,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm. “But there will be some blowback on this.”
American Banker / July 21, 2017
The fact is that financial services organisations are moving jobs to lower-cost destinations regardless of whether their personnel want to move – largely because they want to cut costs. For employees, this means taking a lower salary in a cheaper location. Alan Johnson, the founder of compensation consulting firm Johnson Associates, says that pay is typically 15-20% down in locations where banks are moving jobs. But this isn’t necessarily all bad.
“Companies used to apologize to employees but they don’t do that anymore – they say, ‘The sticker number of your comp will be less, but factoring in the cost of living, you actually may come out ahead,” he says.
eFinancialCareers / July 12, 2017
Alan Johnson, an executive pay consultant who is no fan of excessive compensation plans, says $1 pay schemes for CEOs sound nice, but they rarely work for shareholders. They tend to have a chilling affect on what a company will pay for other top talent. “Was Whole Foods able to get the best talent possible the past 10 years?” Johnson asked.
Bloomberg / June 21, 2017
The new rule is intended to create a level playing for “bad negotiators” who’ve been paid less (women in particular) and who will in future be liberated from the shackles of their historic low pay. However, by encouraging banks to come in with incredibly low offers in an attempt to flush out pay levels, Johnson says legislators will simply make existing discrepancies worse.
For their part, banks will need to carefully document the process leading to candidates disclosing their pay levels voluntarily. – There are fines of $250k for organizations which actively ask candidates to provide the information. “Banks are going to need a paper trail,” says Johnson. “- You’ll have lawsuits over this. Three years later, banks will need to be able to point to a signed declaration saying the employee gave his or her information willingly.”
eFinancialCareers / June 20, 2017
Ford’s board may have decided to leave out the cash base pay (which, prorated, would’ve been a little over $1 million) because unlike stock, a direct cash payment could make for poorer optics, said Alan Johnson of the executive compensation consulting firm Johnson Associates.
Fortune / May 25, 2017
After the first quarter, Wall Street compensation consulting firm Johnson Associates is projecting mixed incentive pay across financial services, with a generally more upbeat business environment and compensation outlook compared to recent years. There’s a long way to go until the end of the year, though, with political and regulatory uncertainty, rising interest rates and ongoing challenges in global markets keeping full-year pay projections cloudy. That said, in general stronger performance has led to optimism that pay will be higher this year compared to 2016.
eFinancialCareers / May 11, 2017
Pressure on asset management profit margins is driving these pay cuts, the firm notes. “The reality is that compensation is not likely to recover to recent market highs and might even fall further in coming years,” says Johnson Associates managing director Francine McKenzie.
FinancialPlanning / April 25, 2017
The reason why scandal-plagued companies are willing to pay millions in severance to allegedly bad actors is because they believe it’s the best way to put a crisis behind them and move on, explained Alan Johnson, managing director at Johnson Associates, an executive pay consultancy in New York City.
Society For Human Resource Management (SHRM) / April 24, 2017
Pensions & Investments
CEO pay cuts at money management firms are following an overall trend for banks that began after the financial crisis as the highly paid top executives of the nation’s largest banks saw compensation drops, Mr. Johnson said.
“It’s someone saying: ‘I can add billions of dollars in value, and for that I want to be paid extremely well,’” said Alan Johnson, managing director of executive compensation consulting firm Johnson Associates Inc. “You don’t see this very often at all. Just like a sports figure, if CEOs believe they’re worth something there’s no reason they shouldn’t ask to get paid.”
Levin’s large pay package comes as compensation has dropped in the hedge fund industry and firms narrow in on paying for performance, says Alan Johnson, managing director of compensation consultancy Johnson Associates.
“Pay has come down meaningfully. People are differentiating better,” he says. “People who perform continue to stay where they are.”
According to Alan Johnson, managing director and founder of compensation consulting boutique Johnson Associates, some boards have moved to reduce discretion in bonus plans in order to appease investors and proxy advisors. “There’s this tension in the marketplace. A lot of it’s driven by ISS and Glass Lewis,” he says. “They hate discretion.”
Still, even if Schultz keeps showing up at the office every day, abdicating the CEO role frees him from some of the pressure of answering to shareholders’ concerns—especially after Starbucks stock fell 7.5% last year. And while Schultz probably has enough pull with the Starbucks board to keep his full pay, and then some, the company would likely be better off if he didn’t, says compensation consultant Alan Johnson of Johnson Associates.
“I think you’d want his pay to be cut in half to send a clear message that the other guy is the new guy,” Johnson says. “If taking a few million less helps the transition to the new CEO, that’s the smartest thing he could do.”
One recruiter says its mailbox has been jammed with CVs from outraged Deutsche staff who are not on what insiders call the “retention list.” Some of these come-and-get-me pleas are from people with at least ten years’ service, complaining that the bank has no regard for loyalty or performance.
“It’s a dramatic decision Deutsche made,” says Alan Johnson, a veteran pay consultant. “They knew there’d be big fallout.”
Alan Johnson, managing director of pay consulting firm Johnson Associates in New York, said the big gains for the leaders of American Express, Goldman Sachs and JPMorgan reflect how stock option compensation can magnify gains in a company’s share price.
“When the stock goes up, with options, you get more leverage,” he said.
“I wish more companies would adopt the way [Exxon] pay[s] their executives, where you don’t get it when you leave, you’ve got to earn it, [and] you get [it] delivered over time,” says Alan Johnson, president and founder of compensation consulting boutique Johnson Associates.
“In 2017, banks will start to rebound – with some of the onerous regulations rolled back, maybe the banks will start to do better, which would be good for everybody,” he said. “A leading indicator of that is their stocks have done particularly well since the election, meaning the markets believe that this will be a positive change for the banks.
Wall Street Journal
“If you listen to politicians, you’d think bankers are still making money like it’s 2007. They’re not,” said Alan Johnson, who runs the firm and helps banks design compensation programs. “You can make this kind of money working at PepsiCo, and life at PepsiCo is lot more pleasant.”
“All signs are pointing to a disappointing end to an overall lackluster year on Wall Street,” said Alan Johnson, managing director of Johnson Associates, which conducted the study.
New York Times
Alan Johnson, the founder of Johnson Associates, describes this pattern as a “malaise,” and one that is unlikely to reverse itself anytime soon.
“I don’t see it changing for the next year or two, either,” he said in a phone interview. “The pressures in the industry on profit and fees are going to continue, and I think pay will likely continue to decline in 2017.”
The bank risks angering staff if it abandons cash incentives entirely, said Alan Johnson, founder of New York-based compensation consultancy Johnson Associates Inc. If the board proceeds, it should at least pay cash bonuses to junior staff and structure something creatively for senior bankers that could dramatically increase in value if the bank recovers.
“Compensation is going to be a much more political process going forward. You’re going to based not only on your merits but what is politically attractive at the moment,” said Alan Johnson, managing director of compensation consulting firm Johnson Associates.
“Most [asset management] sales today involve lots of people – it’s not the stereotype of an individual salesman going around picking up orders,” said Alan Johnson, the founder and managing director of Johnson Associates. “With most fund firms now having a distribution strategy across multiple channels, it requires a more nuanced comp system, more of a hybrid – that’s where the world is going, and it’s the kind of thing you’ve got to get right.”
Compensation plans are, nevertheless, meant to modify behavior, and UBS may be trying to send brokers who still like transactions another message with its new plan, according to pay consultants.
“They probably figure that the transformation to fee-based has stabilized and that they need to keep high-producing brokers in place,” said Johnson Associates founder Alan Johnson.
Wall Street Journal
Let the employer make the initial offer, says Alan Johnson, managing director of Johnson Associates, an executive compensation consulting firm in New York. The problem, he says, is essentially people are guessing at what the company will give them—and they may undersell themselves.
New York Times
“The inequality movement has created a whole backlash against C.E.O. pay,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm.
The 61 percent tally is “uncomfortably close to 50 percent,” said Alan Johnson, managing director of compensation-consulting firm Johnson Associates. “You don’t want to fail the vote, not at a big bank.”
Job cuts and constrained hiring are expected to continue on Wall Street in 2016, with bonuses likely to be lower than in 2015 due to difficult market conditions, according to a study by compensation consultant Johnson Associates.
“My clients have come to the conclusion that lots of these people don’t need to be in Midtown Manhattan or the City of London,” said Alan Johnson, managing director of Johnson Associates, a financial services pay consultant. “It doesn’t make sense any more.”
Wall Street Journal
If federal regulators influence clawback decisions, “there’s a high probability it will drive people out of the heavily regulated part of the financial-services industry,” said Alan Johnson, managing director of Johnson Associates Inc., a compensation consulting firm that closely tracks Wall Street. To retain talent, banks and other affected institutions “will just have to pay more” due to executives’ fears that “you may have to give some of [the money] back.’’
“Although the overall pay rule is tougher than previous versions, it is certainly still more benign relative to European rules,” said Alan Johnson, managing director of Johnson Associates Inc, a compensation consultant serving financial services firms, referring to the proposal.
He said the four-year deferral period “is not overly restrictive.” But the clawback could prove “onerous” since it covers activities of seven years.
“However, the real issue is how it will be determined and who will enforce the clawback?” he said. “Will the government have a role and how consistent will the application be?”
New York Magazine
If federal regulators influence clawback decisions, “there’s a high probability it will drive people out of the heavily regulated part of the financial-services industry,” said Alan Johnson, managing director of Johnson Associates Inc., a compensation consultancy that closely tracks Wall Street. To retain talent, banks and other affected institutions “will just have to pay more” due to executives’ fears that “you may have to give some of [the money] back.’’
“Are people going to hold a charity benefit for Wall Street? That’s probably not going to happen — you’re not going to buy those raffle tickets,” said Alan Johnson, managing director of Johnson Associates, which designs executive-compensation programs for financial firms. “But business school graduates are not wanting to go into financial services. They’re wanting to go do something else. We’re below an equilibrium. If pay does not increase in certain parts of financial services, the industry will not get the right talent. It will not be as competitive.”
Renowned compensation consultant Alan Johnson – who works with most big Wall Street firms – believes that financial services organisations are going to base more roles outside of New York to cut costs. Across the whole country, there will be a reduction of 50k financial services jobs over the next 12 months, Johnson predicts, with approximately 10k of those redundancies in New York. For those who keep their jobs, their pay will drop an average of 10% over that timeframe in the U.S., he said.
But the 10-digit figure shows how important big checks remain in recruiting retail brokers, despite the complaints of senior executives, said Alan Johnson, managing director of compensation consulting firm Johnson Associates.
“[Our] clients have always said that we really don’t want to do this, and then they do it as much as ever,” Johnson said. “It shows you how competitive the industry is. Firms want to attract good people, and they don’t want to lose the good people they’ve got.”
While the boards of big banks all set dollar-price targets for equity awards, some companies determine grants based on the number of shares. Alan Johnson, managing director of compensation consulting firm Johnson Associates, said he prefers a dollar target because setting a unit target could mean runaway compensation if a stock explodes in value.
“It works reasonably well, so long as you do it at the same time every year,” Johnson said. “Some people will say ‘My god, they’re getting a break, getting a low price,’ but that assumes there’s some kind of normal price.”
Wall Street Journal
The decrease is providing the first pocketbook test of the new bonus practices banks established in the wake of the 2008 financial crisis. “It’s a big deal,” said Alan Johnson, managing director of pay consultant Johnson Associates. “The business is down, the market is down, the stock is down. It couldn’t come at a worse time.”
Pensions & Investments
“Money management is doing better than other financial service firms,” he said. “People in asset management are as well paid as anybody, the culture is pretty good and the work is pretty fun.”
“Downsizing and relocation, you’re going to see both.”
Alan Johnson, Johnson Associates
The pay cuts come as Wall Street struggles with falling demand for trading and underwriting. They are also a reflection of Wall Street’s push, in the aftermath of the financial crisis, to squeeze out higher profits through aggressive cost-cutting, even as revenue has remained largely flat.
Instead, Mayer’s 2014 options were granted on Feb. 27 with a strike price of $18.87, even as the stock closed at $38.47 that day. As at many companies, the number of options she ultimately collected hinged on performance targets. Thanks to the way hers are dated, those instruments would have generated $14 million if exercised at the close of trading on Tuesday — rather than nothing.
“It’s extremely unusual,” said Alan Johnson, managing director of compensation consulting firm Johnson Associates. “It’s been a windfall for her.”
Analysis by the Financial Times shows that graduates from the world’s top 10 MBA schools are 40 per cent less likely to go into investment banking now than they were before the financial crisis.
Pay and lifestyle are the two biggest deterrents. Alan Johnson, managing director of Johnson Associates, a Wall Street pay consultant, estimates that the total pay pool across Wall Street banks will be down by about 10 per cent this year. “It’s less pay, more hassle,” said Mr Johnson.
Alan Johnson, managing director of New York compensation consultants Johnson Associates, predicts average bonuses at the big investment banks globally will be down 10% to 15% this year but with wide variation between different product areas. And he says that the gap between pay at US banks and European rivals is likely to widen.
Wall Street Journal
“It’s a disappointment,” said Alan Johnson, managing director at New York-based Johnson Associates. “It’s been such an uncertain year, a stressful year. Pay is down moderately, but it feels worse.”
The uncertain mood across the industry should continue into 2016, said Mr. Johnson, who predicted many firms would take steps to shrink their workforces again to help lift returns.
“This year will be an inflection point,” he said. “Firms are going to have to look at their cost structures again.”
New York Times
Alan Johnson, founder of Johnson Associates, said many in the industry had been anticipating a rebound. This year, though, those hopes have been fading.
“We kept expecting next year will be the year,” he said. “And it hasn’t really happened — and I don’t see it for the next three to five years.” He added, “It’s hard to see the swell of demand that will bail us out here.”
Big banks and brokerages slashed their bonus pools last quarter after pitiful trading activity led to double-digit revenue declines. Unless things turn around — and soon — Wall Streeters will see shrunken bonuses and possible layoffs, experts said.
“The sun could shine brightly the rest of the year, but most people would be quite surprised if that happened,” says Alan Johnson, a compensation consultant for Wall Street brokerages. Johnson warned that bonuses could be down as much as 10% this year — followed by job cuts next year — if trends continue.
Banks “are starting to restructure their pay strategy because five or six years after the crisis they have extra costs,” Johnson said. “It’s just not working.”
“You’re in business to benefit shareholders, so you should ride up and down based on how the stock does,” said Alan Johnson, an executive compensation consultant at Johnson Associates in New York. “We want our executives in America under pressure. That’s a good thing.”
Wall Street bonuses won’t be paid until the beginning of 2016, but the people who track them are already predicting a windfall for the investment bankers who advise companies on corporate combinations. In fact, they’re predicting it’ll be the biggest payout in years. Alan Johnson, one of Wall Street’s top compensation consultants, estimates that overall compensation for mergers and acquisitions bankers could be up by as much as 50% this year.
“Since the financial crisis, their CEO pay has come down, and their median employee pay is generally high,” Alan Johnson, managing director of compensation-consulting firm Johnson Associates, said about financial-services companies. “They don’t have a lot of seasonal workers — they have a lot of full-time versus part-time workers. Their ratios will not be as high as people expect.”
When companies begin to disclose CEO-to-worker pay comparisons in 2017, it could demonstrate that women CEOs have more reasonable ratios. But it may more likely be the case that firms with higher proportions of women employees will have more eye-popping numbers.
“I think that’s likely to be true. The way the ratio is calculated, it’s intended to skew and make companies that employ a lot of part-time workers look worse,” Johnson said. “So I would think in some industries — fashion retailing, fast food, some of the big department stores — they employ not only a lot of women, but a lot of part-time women.”
Global Finance Magazine
…“I think the impact will be relatively small, as I don’t see investors spending a lot of time looking at it,” says Alan Johnson, managing director of Johnson Associates, a compensation consulting firm. “But it will be one more headache for companies, and it will require some additional expenses to comply with.”…
New York Times
…But some say the rules seemed designed more to shame companies and their executives than to provide shareholders with any meaningful insights. “If you are a serious shareholder, you know what the stock has done, and you can come to your own conclusion about whether the C.E.O. is the right leader,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm in New York. “The real purpose of these rules was to embarrass corporate America.”…
…While Mr. Fleming was one of the highest paid of his peers, his raise was consistent with brokerage executive pay increases across the board, according to Jeff Visithpanich, a managing director at Johnson Associates, which specializes in executive compensation.
“If you look at just asset management, I would take that to say they thought he did a good to very good job,” Mr. Visithpanich said of Mr. Fleming’s salary. “There are some [raises] higher than 10%, but the middle of the pack is high single digits to 10%….
The Wall Street Journal
…“In good times the generals eat first and the troops eat last,” says Alan Johnson, managing director of compensation consulting firm Johnson Associates Inc. With the crisis still fresh in people’s minds, he says, that dynamic is much less pronounced…
…To compete, Wall Street needs to improve its treatment of workers, says Alan Johnson of compensation consulting firm Johnson Associates.
“The conventional wisdom for 30 years was that if you want to make the most money you go to Wall Street. But now you can make more money in tech, and you can have a more interesting and better culture,” he said.
…Alan Johnson, managing director of compensation consultant Johnson Associates, says the design of comp programs for banks has stabilized as companies have come to terms with regulations.
He says that, in general, executives have a small salary, a moderate cash bonus and performance-based stock…
The Wall Street Journal
…Alan Johnson, managing director of compensation consulting firm Johnson Associates, said executives should expect to take a pay cut if there’s a scandal on their watch, even if the conduct happened prior to their time in that role. “The expectation is, you take a hit. It may not be your fault…the lesson for executives is to expect it,” said Mr. Johnson. His advice: Get out ahead of the board and volunteer for the pay cut, or give up an expected bonus. “It’s probably going to happen anyway, so why go through the pain of [the board] having to agonize over it?” he said….
…Johnson Associates says cash and stock bonuses for the banking industry are expected to be largely stagnant from a year ago. The mostly flat bonuses are driven by two things, said Alan Johnson, managing director of the firm.
“It’s weak revenue growth and continued cost from regulation and litigation,” he said. “Profits are so-so.”….
…“Variable compensation is usually tied to performance or profitability in a way that lets the manager know where he stands at all times,” says Alan Johnson, a managing director with Johnson Associates. “You may not see that degree of clarity at larger fund firms.”…
U.S. Regulators Revive Work on Incentive-Pay Rules; Compensation That Rewards Excessive Risk Taking Is a Concern
The Wall Street Journal
…The banks “went way further than anybody else in financial services and that became a competitive disadvantage to get people [and] keep people,” said Alan Johnson, managing director of Johnson Associates.
The Wall Street Journal
…The same month, Johnson Associates said trader bonuses would fall by as much as 10%. Investment-banker payouts could jump by up to 15%, according to the compensation-consulting firm…
…Johnson Associates managing director Alan Johnson believes the public and politicians such as Sen. Elizabeth Warren (D., Mass.) are so focused on demonizing the banks they are willing to overlook extremely high pay in other industries, even ones that are very similar to banking and employ similar people….
…”I don’t think they, unfortunately, have done enough to encourage ownership of firms,” said Johnson Associates managing director Alan Johnson, who has spent 25 years advising big financial companies on their pay practices…
The Wall Street Journal
….Morgan Stanley isn’t the only bank de-emphasizing delayed gratification for its bankers and traders. Deferred bonus pay has been on a slow decline since 2010, according to consulting firm Johnson Associates Inc. Earlier this year, Johnson Associates estimated about 36% of a $1 million bonus on Wall Street is deferred, compared with 45% in 2010.
Banks have gradually inched back toward paying more cash in order to be more competitive in “keeping and attracting talent” that might otherwise leave for hedge funds and private-equity firms, said Alan Johnson, managing director of Johnson Associates.
From the ashes of the financial crisis emerged a big change in how Wall Streeters got paid. Out went the legendarily massive year-end cash bonuses. In came IOUs.
“People were screaming bloody murder,” recalled Alan Johnson of compensation consultancy Johnson Associates. “They were yelling, ‘Pay me now!’ ”
An asset manager’s compliance staff does more than just say “no” to their colleagues, they help win mandates.
….Asset managers no longer want someone who just tells colleagues what isn’t allowed, but instead someone who can offer creative responses to problems and propose new ideas, says Alan Johnson, managing director of Johnson Associates.
….Compliance as a career is a new concept. Previously, compliance was often an extra duty thrown on the operations team, and not something people actually sought out as a job, says Johnson. But as regulations continue to grow and dominate the industry, “compliance is only going to get bigger,” says Johnson. While not as “sexy” as other investment industry positions, compliance offers reasonable security and good pay, making it a very appealing career choice, he says.
Wall Street’s bonuses—aka the ultimate measure of all that is important and worthy in finance—might be shrinking for many a banker this year. That’s the dismal news from Johnson Associates, a compensation consulting firm, which released its annual survey on the matter on Monday.
Strong investment performance and positive inflows will translate into more money in the pockets of asset management firm executives in 2014, new research has found….
“The increases in pay in the asset management business make it one of the most attractive parts of financial services,” says Alan Johnson, managing director of compensation consulting firm Johnson Associates….
Firms are moving away from compensation plans based solely on commission and adopting a “hybrid” model that includes commissions and some discretion, Johnson says. “The contribution [of sales people isn’t as obvious] as it was before,” he says. “That is an important change in the industry.”…
Human Resource Executive
….Meanwhile, many retailers such as IKEA, Gap, Whole Goods and Costco aren’t standing idly by, waiting for Congress to take action. They’re already paying workers above the federal minimum wage, adds Alan Johnson, managing director at Johnson Associates, a New York-based consulting firm that specializes in compensation.
Minimum-wage laws have also been passed in 22 states, including Michigan, Montana and Missouri, with wages higher than the federal rate.
All things considered, that’s partly why the survey’s results don’t surprise Johnson. Although there are people willing to work for minimum wage, he says employers realize that the savings simply aren’t worth it when considering the problems that sometimes accompany low wage earners like high absenteeism.
Johnson believes an increase to between $10 and $11 per hour is “the sweet spot?. Still, wages are tricky and vulnerable to snowballing, creating even more problems….
Equity analysts at asset managers often enter the position for life, a decision that could be paying off with better compensation and work culture than their investment bank counterparts.
Before the financial crisis, working on the sell-side of finance was known to be arduous but lucrative. Since then, industry changes have lowered the pay and eliminated many positions, making the buy-side higher paying for analysts, says Alan Johnson, founder of compensation consultancy Johnson Associates.
“Now you make more money and the culture is better,” he says. “It’s a good time to be in research in asset management.”
….Although Gorman’s wealth management target was the most aggressive cut to pay ratios in Morgan Stanley’s three business units, the 55 percent ratio is still much higher than the 40 percent or less he outlined for institutional securities and investment management.
“Bank executives say, it’s a high-cost, high-aggravation business and why can’t we bring it under control?” said Alan Johnson, a Wall Street pay consultant, referring to the challenge of managing the personalities and pay packages of thousands of individual advisers. “They think about it every day – even just getting another 1 percent on billions of dollars’ of revenue is a lot of money.”….
Making it big in media means generating hits. And while top executives may not be hands-on with every decision, they are where the buck stops.
Take Disney’s animated blockbuster “Frozen,” which grossed $1.2 billion at box offices worldwide. While Disney CEO Bob Iger didn’t make the movie, he did orchestrate Disney’s $7.4 billion acquisition of Pixar in 2006, which brought in talented executives to help reform Disney’s faltering animation studio.
“With movie studios and the media, it’s more of a talent business. You have highly paid people at all levels,” said Alan Johnson, managing director of Johnson Associates, a compensation consultant in New York. “The view is the right CEO can make a big difference.”
The Wall Street Journal
Shareholder advisory firm ISS strongly disapproves of Walmart Stores Inc.’s corporate governance, assigning it “8” on a 10-point scale where 10 indicates the highest level of risk….
Alan Johnson, managing director at compensation consulting firm Johnson Associates, told Risk & Compliance Journal that Walmart’s practice of adjusting compensation when performance targets are not achieved is neither unusual nor unjustifiable. “I have many clients that do that,” he said, noting that in a complex, global company facing pressures on several fronts, boards often want to retain flexibility. However, he also noted that “Walmart does not do a very good job of explaining.” But when half of the stock is in the control of the founding family, shareholder outreach may be an understandably low priority….
Coming in a year in which corporate earnings gains continue to come mostly from job cuts and streamlining instead of organic growth, as well as nearly a decade of stagnant wage growth for rank-and-file workers, continued gains in CEO pay underscore the disconnect between boardrooms and Main Street. Among the nation’s 104.8 million full-time workers, average median annual wages were $40,872 last year, up just 1.4% over 2012.
“The extremes are getting bigger and run smack dab into the debate of income inequality,” says veteran compensation consultant Alan Johnson.
“Board’s are quite concerned over how executive compensation will be perceived. There’s very little of, ‘Let’s make Mr. Big happy because we’re all friends and he’s a nice man.’ But you try to balance what’s competitive. I tell boards that their primary goal is to do what’s best for shareholders. If a CEO has created shareholder value, whether they’re good or lucky, and things look like they’re going to go well, you’re probably going to have to pay a lot.”
It is not unusual for a CEO to leave a firm with a golden parachute worth tens of millions of dollars…..
But C-suite parachutes are not as golden as they were before the financial crisis, says Alan Johnson, managing director of the compensation consulting firm Johnson Associates.
“The trend has been for a reduced severance over the last five or 10 years for CEOs,” he says. “That was one of [shareholder activists’] real hot-button issues.”
These days, firms are offering executives a year or two of pay, down from three, he says.
“The general view is you were paid well while you were there and the careers were shorter,” says Johnson……
(Reuters) – Big U.S. companies appear to have handed out smaller increases in compensation to their chief executives in 2013 than in 2012, mainly as a result of reduced grants of stock options, according to an early review of annual regulatory filings.
Based on disclosures from 46 companies in the Standard & Poor’s 500 Index that had filed annual compensation reports by March 11, the median compensation increase for a CEO was 1 percent to $8.64 million.
That was a slower rate of increase than this group of 46 received for 2012 when its median CEO pay rose 15 percent to $8.53 million. The median compensation for CEOs in S&P 500 companies overall increased about 5.5 percent for 2012.
The review, conducted for Reuters by proxy adviser and corporate governance consulting firm Institutional Shareholder Services, provides an early peek at compensation trends but ISS cautioned that there could be significant changes once all companies have reported and that the 46 companies may not be representative of trends for companies in the entire index. Most companies will file their executive compensation data over the next few weeks…..
“They’re not going to get monster rewards,” said Alan Johnson, managing director of pay consulting firm Johnson Associates in New York. “The indications are that companies continue to do a better job of matching up pay with performance.”
Year-end bonuses are tethered to the tides of the market and the tide was high in 2013. According to a FundFire reader poll and expert interviews, asset managers and financial advisors mostly saw their compensation go up or hold steady compared to last year’s take.
Pay bumps for both institutional asset management professionals and financial advisors are largely attributable to the bull market in equities, experts say.
The reason is particularly straightforward in the institutional space, according to compensation consultant Alan Johnson, where he said compensation was typically up 10 to 15%. In fact, the bonus season seems to have been relatively predictable—in a December FundFire poll, 89% of respondents predicted their compensation would grow or stay the same, compared to the 84% who reported that in last week’s poll…..
“This year it’s a simple story,” says Johnson, managing director of New York-basedJohnson Associates. “It’s attributable to two things really: better markets and firms doing a good job of getting their costs under control. They had the right-sized organizations, the markets were favorable and they were greeted with asset flows they hadn’t seen in a while.”
Larry Fink is one lucky guy.
Fink will take home in excess of $20 million for his Wall Street work last year, when he successfully guided New York’s largest asset-management company, BlackRock.
“He’s right at the top. He’ll be north of $20 million — and, of course, BlackRock has done great,” compensation expert Alan Johnson told The Post.
Johnson says BlackRock, along with other huge asset managers, are part of the latest “seismic change” in 2013 salary and bonuses….
“The other surprise,” said Johnson, “is how long it has taken the industry to recover from the financial crisis. We are all seeing the light now at the end of the tunnel.”
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, who got a 74 percent raise for his work in 2013, stands to reap a separate and bigger payday within months.
The bank’s board of directors, having delayed a decision for more than a year, has yet to say whether Dimon, 57, can collect 2 million stock options originally granted in 2008 and now worth about $34 million. Last week, the board increased his annual pay to $20 million from $11.5 million a year ago, when he was penalized for faulty oversight of botched derivatives bets….
After Dimon’s incentive package was created six years ago, JPMorgan grew to become the nation’s largest bank with shares outperforming the industry, and then snapped a three-year run of record profits as costs from government probes surged. The board’s decision to boost Dimon’s annual pay despite mounting legal settlements shows he probably will get the full options award, said Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc.
“It’s obvious the board wanted to send a signal about what they think of him,” Johnson said. “It’d be very inconsistent to say, ‘You’re our guy, and we want to send an emphatic public message that we think very highly of you.’ And then, ‘Oh by the way, you didn’t earn this over the last five years.’”
Wall Street’s senior executives have been holed up in conference rooms across Manhattan the last couple of weeks, locked in tense all-day sessions. The special project: dividing up this year’s spoils as bonus season approaches.
Over the last month or two, headlines have speculated that 2013 will turn out to be an excellent one on Wall Street. By some estimates, bonuses should rise as much as 10 percent across the board, if not more. A survey of bankers in London released over the weekend suggested they expected to receive bonus increases of as much as 44 percent.
By the sound of it, you would think that being a banker on Wall Street once again meant you were a 1980s-style Master of the Universe…..
According to Johnson Associates, a compensation consulting firm, big banks set aside $91.44 billion for 2013 bonuses in the first nine months, down from $92.49 billion in the period a year earlier.
An investment banking managing director might make $850,000, down from at least $1 million a couple of years ago and $2 million to $3 million before that. A vice president is likely to receive about $400,000, compared with $750,000 a couple of years ago.
Nearly 50% of respondents to a recent Ignites reader survey said they expect a larger bonus for 2013 than they received for 2012, with 43% expecting a moderate increase and 6% predicting a significant increase.
The results are as of late afternoon Tuesday, with 437 readers voting. Click here to vote in the ongoing poll.
Just 17% said that they expect their bonuses to fall below their 2012 payout, with 12% envisioning a moderate decrease and 5% expecting a significant decrease….
Alan Johnson, managing director of compensation firm Johnson Associates, also sees the poll results as an on-target prediction of 2013 bonuses.
“They can look to the markets. There’s transparency about what drives business and thus compensation,” Johnson says. “If you tell me what the average for the S&P  will be in 2014, I can give you a pretty good estimate about bonuses.”
When Wall Street firms announce their 2013 bonuses in December and January, employees will see an average bump of 5% to 10%, according to a closely watched compensation survey put out by New York compensation consultants Johnson Associates, which releases three Wall Street pay reports a year. To collect its data, the company queried eight of the nation’s largest investment and commercial banks and 10 of the biggest asset-management firms. It also looked at publicly available data.
Though the overall picture is a positive one for Wall Streeters, with bonuses rising for the second straight year, some employees will do worse than others. According to Alan Johnson, Johnson Associates’ managing director, firms will pay out differing amounts to different divisions. “A firm is really a combination of a bunch of businesses,” he explains….
“Banks are making a lot of money and they’re all fundamentally healthy,” says Johnson. “Their risks are under control but they still have not fully recovered from the financial crisis. The reality is the world economy has not recovered.” There is obviously still time before the end of the year and an uptick in trading or deals could change the bonus picture.
Money management professionals can expect to see a jump of 10% to 15% over last year’s bonus payouts, according to projections from compensation consultant Johnson Associates.
The projection matches Johnson’s preliminary estimate of the same range in May.
Incentive payouts for professionals in hedge funds, equities, private equity and prime brokerage will increase anywhere from 5% to 15% compared to last year.
“This year is shaping up to be a relatively strong one for the asset and wealth management industries,” said Alan Johnson, managing director of Johnson Associates, in the report. “However, ongoing cost-cutting initiatives across the financial services industry, combined with continued uncertainty and an uneven economic recovery are keeping incentives somewhat in check.”
The projections are based on third-quarter trends in the financial services industry, according to the report.
When it comes to compensation, it looks as if 2013 is going to be remembered as a pretty good year to have worked on Wall Street, unless you are a fixed-income trader.
Financial advisers, asset managers and underwriting investment bankers can expect their 2013 bonuses to rise as much as 15 percent, according to a closely watched compensation survey to be released on Thursday. Over all, Wall Street employees can expect year-end bonuses to grow 5 to 10 percent on average, the second consecutive year of increases, according to the survey, produced by Johnson Associates.
Bonuses for bond traders, who had a terrible year because of interest rate instability, could drop by just as much or more….
“What’s interesting is, for decades almost every year the big Wall Street firms were the highest-paid firms in financial services,” said Alan Johnson, managing director of Johnson Associates. Now, however, the big asset managers are “on par” with what those big firms are making, he said.
Johnson Associates, based in New York, surveyed eight of the country’s largest investment and commercial banks, 10 of the largest asset-management firms and public data.
Wall Street’s bonus season should be a good one for those who manage other people’s money. But for many bond traders and merger bankers, 2013 could be a year to forget.
Year-end bonuses among 18 large banks, securities firms and asset managers could rise 5% to 10% this year, paced by higher payouts for asset-management and wealth-management employees, according to an analysis by compensation consultant Johnson Associates Inc.
The mood may be more subdued on bond-, currency- and commodities-trading desks and within merger-and-acquisition departments—two of Wall Street’s traditional power bases.
Johnson forecasts a 5% to 10% drop in the bonuses paid to merger bankers, while fixed-income traders could see payouts fall more than 15%…..
Despite the mixed money bag this year, the average Wall Street senior official is still doing quite well. In investment banking, a managing director earns about $850,000 a year in salary and bonus, while a vice president, usually one or two rungs below a managing director, collects $400,000, said Alan Johnson, managing director at Johnson Associates.
On trading desks, managing directors average about $750,000 a year and vice presidents $350,000, he said. Big pay packages are less common than they used to be. “There used to be a lot of two or three millions,” Mr. Johnson said.
Wall Street’s biggest risk takers – its bond traders – will probably see their bonuses drop this year, while people in safer roles, such as money managers, will likely get a boost, according to a forecast by compensation consulting firm Johnson Associates.
Overall, it said, individual Wall Street bonuses may rise 5 to 10 percent, on average, compared with last year, as the industry continues its halting recovery from the 2007-2009 financial crisis. Top executives of Wall Street firms will see bonuses rise by as much as 5 percent, Johnson Associates said.
But Alan Johnson, who heads the firm, said there is a wide disparity in payouts among business lines. The bonus spectrum reflects new priorities for Wall Street as much as market conditions, he said…..
“From a regulator’s perspective, that’s what you want,” said Johnson. “You want the banks to be in client businesses that use other people’s money so that they’re not too dependent on trading.”
Rising stock markets and weakening fixed-income markets have also been a factor in helping retail brokers and hurting bond traders, Johnson said.
The nation’s biggest banks are getting squeezed from almost every direction, quarterly reports show, from slumping mortgage demand to a sluggish economy and tumultuous bond markets.
The result has been a lackluster third quarter for lenders from behemoths like J.P. Morgan Chase JPM +0.62% & Co. and Citigroup Inc. to regional banks such as PNC Financial Services Group Inc. and M&T Bank Corp.
The 10 largest traditional commercial banks and securities firms in the U.S. that have reported earnings thus far posted a 6.9% decline in combined adjusted net income, to $17 billion. Adjusted revenue totaled $116 billion for the quarter, a 4.8% decrease from the same period in 2012…..
Alan Johnson, managing director of New York-based compensation-consulting firm Johnson Associates, estimated fixed-income, currencies and commodities employees’ year-end pay will fall 15% from last year. “People are going to be frustrated,” said Mr. Johnson, adding that “it’s going to be tough to find much greener pastures somewhere else.”
Overall, bonuses on fixed-income, currency, and commodity trading desks will likely be down 10 percent to 15 percent, said Alan Johnson, head of the Wall Street compensation consulting firm Johnson Associates. It could be the third or fourth year in a row in which some Wall Street bond traders get $0 bonus checks, he added.
Just two months ago Johnson had predicted bonus increases of 5 percent to 15 percent for fixed-income traders, but since then the Federal Reserve has decided not to start winding down its bond buying stimulus program, and gridlock has hobbled Washington. Both have alarmed investors who are unsure of where markets are heading, and are reluctant to make huge bets that could quickly turn against them.
A mid-level Wall Street trader might earn $500,000. Before the crisis, total compensation might have been closer to $800,000, said Johnson of the Wall Street compensation consulting firm Johnson Associates.
As reported yesterday by the Wall Street Journal, Daniel P. Stipano, deputy chief counsel, Office of the Comptroller of the Currency, called on banks to tie compensation to compliance, and said, “If you don’t do that, you’re really just engaging in empty talk.” The reaction from some in the industry: where have you been for the past five years?……
“I think the big story may be that a senior regulator is clueless about how his own government is regulating pay,” said Alan Johnson, a compensation consultant for financial services firm Johnson Associates. “The banks have embedded this in their pay systems as best they can, they spend a huge amount of money monitoring this kind of stuff. Compliance, following the rules, taking too much risk–they take those kinds of things extraordinarily seriously.” Indeed, there’s evidence pay is already reflecting compliance, at least on the downside. In June, a report by the consulting firm Equilar and the Financial Times found bank CEO pay down about 10% in 2012 on investor and regulatory pressure. The lowest paid CEO in the study was Barclays CEO Antony Jenkins, whose predecessor, Bob Diamond, exited in the wake of the Libor scandal; Jenkins himself took no bonus “because of various scandals, including Libor,” the FT said. Earlier this year, Jamie Dimon saw bonus cut in half and faced a boardroom battle over splitting the CEO and chairman roles in the wake of compliance problems including the London Whale trading scandal.
In August, Wall Street Journal financial editor Francesco Guerrera wrote of a new “era of regulation” in banking. The open question seems not to be whether banks are adopting executive comp programs tied to compliance, but what unintended consequences might follow that focus on compliance.
Wall Street is highly profitable again, but cost-cutting and regulatory pressures should keep compensation totals from increasing at near the same rate. We talked to Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc., to discuss the presumed winners and losers of 2013 and the potential impact of EU bonus on both sides of the pond.
What do you expect from Wall Street bonuses this year?
I think certainly all indications are this is a positive year. Wall Street bonuses will likely be up 5-10% on the year, with the news being more positive for U.S. bankers due to geography and their recent wins. It’s an unusual year though, as everyone seems to be headed in same direction. Asset managers, banks, insurance companies – they’ll all see around the same rise.
Any occupations that you expect to be better compensated than others?
I think some of the trading businesses in equities and fixed income will see a nice rise in bonuses. Investment bankers will do worse due to volumes not fully coming back.
Consultant relations professionals are resisting calls to make their compensation more long term to align it with the duration of their clients’ investments, recruiters say, following recent European proposals along those lines that would have affected U.S. managers with E.U. arms.
In July, the European Union rejected legislation that would have capped asset managers’ bonuses and forced compensation to be deferred over longer periods of time. The proposed restrictions came on the coattails of a successful law imposing similar restrictions on bankers…..
Alan Johnson, managing director at compensation-consulting firm Johnson Associates, says he works with clients who would like to switch their consultant relations staff over to a commission structure.
But Johnson discourages that idea, saying that consultant relations professionals should be encouraged to take their time developing relationships and meeting the needs of the consultants, not the other way around. “If you motivate people to push what’s hot at the moment, you’re not going to have anything in the future,” says Johnson. “It’s a long term relationship, and the impact [consultant relations] have is indirect.”
Just as sales professionals have not responded well to attempts to switch their compensation to a bonus structure, as reported, consultant relations professionals do not usually like a commission structure. “It takes years to foster relationships,” says Johnson. Paying consultant relations a more black-and-white commission basis could make it difficult for them to earn commission in the earlier years of their career, as well as in lean sales periods.
While deferred commission payments may work for sales people in order to encourage better retention, it’s not a necessary hook for consultant relations staff, according to Johnson. Consultant relations professionals generally have better retention as their jobs are seen as less stressful and more long-term given that they involve developing relationships in slow moving bureaucracies. Nevertheless, not everything about a consultant relations pro’s duties are laid back. “[Consultant relations] a hard job in an industry where people want to get things done quickly,” he says.
The discrepancies are the latest wrinkle in the final writing of the Volcker rule, which will force banks to scale back bets they make using their own capital. Banks know the broad outlines of the rule, but regulators may not issue a final version until later this year, leaving banks little time as they scramble to comply by July 2014.
The employee-participation provision—designed to avoid a situation where banks, in the event of a crisis, rush to rescue heavily employee-invested funds, said a person involved in the rule-making process—is causing particular consternation….
Alan Johnson, managing director of New York-based compensation-consulting firm Johnson Associates, said he has worked with banking clients frustrated with the lack of guidance on the employee-participation portion of the rule. “This is just one more thing where the rules weren’t quite clear,” he said. “The skeptics said it would take a long time for the rules to come out, and I guess they were right.”
The fortunes of large financial services companies have improved dramatically from the dark days of the recession, but paychecks for the leaders of those companies still aren’t what they used to be.
Compensation at broker-dealers and asset-management firms generally has increased along with the recovering financial markets during the past two years, but it remains substantially below pre-crisis levels, consultants said….
“There’s usually a premium to work on Wall Street, but it’s shrunk,” said Alan Johnson, managing director of compensation consultant Johnson Associates Inc.
He characterized last year as “so-so” overall for financial services executives and suggested that the fallout from the financial crisis continues to suppress executive-pay levels.
“Some people still believe that executives in this industry should make very little,” Mr. Johnson said
Many industry professionals are optimistic that their 2013 compensation will be higher than last year’s pay.
That is according to the results of an Ignites poll that also found nearly 40% of participants predict they will earn about the same amount this year as last year.
Roughly 36%, or 156 voters, expect their total 2013 pay to be slightly higher than last year’s earnings, while 10%, or 46 voters, believe it will be much higher……
The poll results “are consistent with the general perception that the industry is continuing to improve, but perhaps not all boats are rising, or rising at the same rate,” says Francine McKenzie, a managing director at compensation consulting firm Johnson Associates. McKenzie’s firm estimates incentive pay increases of 10% to 15% in 2013 for industry professionals.
Wall Street bonuses and staff levels are expected to rise this year as trading and deal-making activity pick up, according to a closely watched report released on Friday by a compensation consulting firm.
Johnson Associates predicts that senior bank executives will receive bonus increases of 5 percent to 15 percent, with investment bankers getting the biggest potential bonus increases of up to 20 percent.
The firm, headed by long-time industry pay consultant Alan Johnson, cited “signs of economic recovery in the United States and positive market momentum” in its report, but also noted that new regulations and a slowdown in Europe may weigh on bank profits and employee compensation.
Corporate governance experts believe Wal-Mart Stores’ recent decision to tie executive bonuses to compliance objectives could be a bellwether for how other large, multinational companies hold management accountable should their firms run afoul of certain regulations.
The retail giant has undergone an overhaul of its compliance operations following a federal investigation into bribery allegations in Mexico last year, and has recently added provisions to its executive incentive compensation program that will tie bonus payments to compliance objectives, according to a proxy statement released on April 22, 2013….
Compliance-based objectives have already been adopted by heavily regulated industries such as financial services and pharmaceuticals, but are rarely seen in other American industries, says Alan Johnson, a financial services comp expert and managing director of Johnson Associates.
Johnson says that it could be difficult to be very specific and objective toward exact compliance standards and goals, as many of the regulation and compliance issues could be seen as politically motivated.
Lots of companies talk about making compliance and ethics a priority. Walmart is putting its money where its mouth is.
The retail giant announced last month that it will soon begin basing a portion of compensation for top executives, including CEO Michael Duke, on the company’s ability to meet compliance goals. If top executives don’t meet compliance objectives, they risk having their annual bonuses reduced….
By adopting incentives to meet compliance goals, rather than penalties for compliance infractions, Walmart is ahead of the curve. “Most executive compensation or bonus plans will have subjective elements,” says Alan Johnson, managing director of Johnson Associates, an executive pay consulting firm based in New York City. “There will be wording in there that you have to comply with laws and regulations, but it has always been more about after the fact—after there is a problem—instead of upfront and proactive. Compliance should be holistic, not just following the rules, but going beyond the rules and avoiding problems.”
What’s the difference between a media mogul and a chief executive elsewhere in the business world? About $10 million in compensation, give or take.
Leaders in other industries may be well paid, but as the accompanying chart shows, they earn far less than their media counterparts.
Consider: the top 20 companies in the United States ranked by market capitalization include no media companies. But according to figures assembled for The New York Times by Equilar, which compiles data on executive compensation, media companies employ seven of the top 20 highest paid chief executives.
As investment consultants and managers launch outsourced CIO (OCIO) services to meet institutions’ demands, consultant relations professionals who woo consultants on behalf of managers have been left with a very different job description.
Consultant relations professionals, who once had the sole objective of servicing investment consultants in the hopes of winning business from their institutional clients, now find themselves in a role more similar to that of an institutional sales professional, either selling their own OCIO services to consultants or hoping to land a spot on an investment consulting firm’s OCIO platform….
Compensation expert Alan Johnson, managing director of Johnson Associates, says that complications and additional responsibilities brought on by the surge in OCIO demand has actually frustrated some consultant relations professionals who feel they aren’t being compensated for the increased assets they’re bringing to their firms as a result of OCIO sales. But if they can find a way of tracking their contribution, he says there may be more room for discussion over their future pay packages – as well as their recognition at their firms.
“Many consultant relations professionals would like a commission but in that [OCIO] world it’s harder to do,” Johnson says. “You work for a very long time to get results and when results do come, it’s hard to quantify they are do. It’s more of a base [salary] and bonus structure. If that really takes hold and brings in a lot of revenue, it will be easier to track. It will lead to more of a commission kind of approach.”
RELAX. Sit back. And forget, for a moment, those pesky shareholders and bothersome boards, the regulations, the investigations and all the other headaches of being a chief executive today.
Dodd-Frank rules? Securities and Exchange Commission lawyers? Leave them behind. And let yourself sink into the buttery leather seat of your corporate jet as it soars through the clouds.
That’s what Steve Wynn did. As chief executive of Wynn Resorts, he sat back and enjoyed more than a million dollars’ worth of personal travel last year on his company’s private jet.
A proposed European Union cap on managers’ bonuses is likely to hit U.S.-based staff at institutional asset managers, experts say, regardless of whether those managers have E.U. arms.
Salaries at asset managers may be subject to greater scrutiny, with compensation deferred over longer periods and fiercer competition for jobs, as E.U. asset manager staff flee to the U.S. and U.S. managers are pressured to ensure parity between their U.S. and E.U. pay practices….
The rules are not yet confirmed, and serve a starting point for future negotiations. The legislative package is expected to pass through European Parliament in mid-April. But uncertainty for the future concerns many, particularly considering this latest move was unpredicted. “This is just mean spirited. This is just pitchfork and flares,” says Alan Johnson, managing director of compensation specialist Johnson Associates. “If they’re willing to do this, what’s next?”
The European Union appears well on its way implementing strict caps on banker bonuses, with finance chiefs for 26 of the 27 EU nations backing the proposed rules. The caps have ruffled many a feather on both sides of the pond, as the rules also apply to Americans working for EU banks as well as the U.S. units of European banks.
Manning & Napier, an asset manager with $45 billion under management, has devised an unorthodox way of compensating its analysts, penalizing them for selections that cause underperformance in client portfolios and carrying these penalties forward into future years. It says the method more closely links analyst goals with institutional investors, but experts disagree….
“It is very demotivating to carry baggage into the future, particularly as an analyst, as you gave the recommendation but you didn’t buy it,” adds Alan Johnson, managing director of compensation expert Johnson Associates.
However, the analysts are also rewarded for how successfully they pitch these ideas to portfolio managers for inclusion in client strategies, how well the company performs and qualitative measures, such as communication and team work. It is hard to measure not only the investment side but also the benefits of an analyst’s negative recommendations, or how much an analyst saved by not recommending a certain stock, says Johnson. “It’s always imperfect how to measure, although firms try very hard,” he adds.
Morgan Stanley’s reported move to defer 100% of 2012 bonuses for high-earning employees is the crescendo of a trend of big banks deferring more pay in recent years. It’s the second straight year of big deferrals at Morgan Stanley, which a year ago held back 75% of bonuses for traders, investment bankers, and other high earners after having been at the 40% level the previous two years.
U.S. companies may be paying out big dividends before tax rates rise next year, but for now they’re holding the line with executive bonuses. “Politically it would be a disaster,” said Alan Johnson, CEO of Johnson Associates.
Wall Street bonuses are no longer plummeting, although the “new normal” emerging now is below the industry’s pre-recession heyday. “The revenues of these firms just aren’t good enough. There’s a pretty good alignment between pay and performance,” said Alan Johnson, managing director at consulting firm Johnson Associates Inc.
Wall Street workers, whose bonuses and year-end incentives fell by as much as 30% last year, will see slightly bigger bonuses and stock awards in 2012.
Wall Street employees, whose paychecks have often been cut in recent years, are likely to get a slight bump in their bonuses this year. The catch: the increase will come on top of one of the worst years for bank pay in recent memory.
Wall Street pay will bounce in 2012 from last year’s sharply reduced levels, but bonuses will be lower and have more strings attached than before the financial crisis, the latest tally of finance-industry compensation shows.
So-called incentive-based pay, which includes cash and stock awards, is set to climb 5% to 10% from a year earlier, according to a forecast set to be released Monday by consulting firm Johnson Associates. At the same time, financial firms are keeping a lid on cash outlays by deferring more pay and trimming their workforces.
“We are as low as we have been in 10 or 15 years,” said Alan Johnson, managing director of Johnson Associates, referring to Wall Street’s bonus pool. “It’s the new normal.”
Mr. Johnson said an equity trader who is managing director at a major firm could receive as much as 70% of his pay at a later date, an arrangement that ties more compensation to long-term performance.
Reflecting a big rebound from last year’s plunge, the survey said bond traders—among the hardest hit in terms of pay in 2011—could see their bonuses rise 10% to 20%, even though several firms are scaling back fixed-income trading operations.
J.P. Morgan Chase & Co.’s third-quarter results highlight a Wall Street juggling act: how to contain costs amid soft growth and volatile markets without losing highly paid, sought-after workers.
Almost half of Wall Street employees expect their year-end bonuses to be higher this year than they were a year ago, according to an eFinancialCareers.com survey.
On Wall Street, sometimes the bottom shapes the top. Consider J.P. Morgan Chase & Co. (US:JPM) . On Friday, reports surfaced that two more executives, Irene Tse, one of the executives in charge of trading and Barry Zubrow, the bank’s regulatory affairs chief, will step down in the wake of the “London whale” trading scandal. See report on Tse and Zubrow’s pending exit.
It’s a little hard to look at Wall Street without cringing these days. The nation’s richest financiers have been moping around midtown east like Eeyore, despondent about their stock prices, their return-on-equity figures, and the fact that the president won’t read their grandkids’ poetry manuscripts.
Morgan Stanley became the latest bank to announce more layoffs to shrink expenses as Wall Street prepares for an extended period of weak global economic growth and low trading and dealmaking volumes.
Wall Street bankers are bracing for another round of job cuts as a downturn in the global economy cuts into earnings from dealmaking, capital raising and lending.
New projections call for moderate 2012 bonus increases across all financial services sectors, with fixed income showing some of the largest potential incentive-pay gains—as much as 25 percent in some cases.
Wall Street is getting its first high-profile opportunity to prove it is serious about recovering pay from executives whose blunders waste shareholder treasure.
Big banks are expected to use a larger portion of profits for employee bonuses this year, despite extensive job cuts and a recent outcry from shareholders over excessive pay, according to a closely watched survey of Wall Street compensation.
Bonus payouts by traditional and alternative money management firms look set to rise “moderately” in 2012, as market appreciation makes up somewhat for stagnant net flows, according to a report Wednesday by compensation consulting firm Johnson Associates.
Jamie Dimon, awarded $23 million for running JPMorgan Chase & Co. (JPM) last year, earned 67 times the average amount set aside for his investment bankers and traders, the widest gap among firms that report divisional pay.
Shareholders sent a message to Citigroup Inc. this week when they voted against hefty pay packages for its CEO and other top executives.
The take-home pay of U.S. chief executives grew at least 10 percent in 2011, propelled largely by a stock market rally, according to consultants’ estimates.
Goldman Sachs Group Inc. credit traders Matthew Knopman and Philip Ha are leaving for hedge funds after the fifth-biggest U.S. bank by assets cut jobs and pay last year.
Wall Street bonuses hit bottom and are poised to rebound about 20 percent this year as markets improve, according to Alan Johnson, president and founder of compensation consulting company Johnson Associates Inc.
Every year since the 2008 crisis, investment bankers at many of the large global banks have seen less and less of their bonuses in up-front cash and more in deferred stock and staggered cash payouts pushed out to two to three years down the road. During the 2011 bonus season, banks including Morgan Stanley, Barclays plc and Deutsche Bank AG have employed even stricter deferral policies, reportedly enacting up-front cash caps on bonuses of $125,000, £65,000 ($103,000) and $265,000, respectively.
MBIA did not award bonuses to its top executives in 2011, but only after its regulator pressured the beleaguered bond insurer to withhold the payouts, people briefed on the matter said.
UBS (UBS) on Tuesday became the first investment bank to announce a major “clawback” of bonuses after a rogue trading scandal at the Swiss bank last year led to deep losses.
NEW YORK (Dow Jones)–Goldman Sachs Group Inc. (GS) paid its employees an average of $367,057 for 2011, a decline of 15% from a year ago, reflecting the tough times experienced by banks and securities firms since last spring.
The investment bank, known for rewarding its bankers and traders with the highest payouts among Wall Street investment banks, set aside $12.2 billion for compensation and benefits for the full year, down 21% from the $15.4 billion it allocated a year earlier. Last year, Goldman paid employees an average of $430,700….
“Most of us had been anticipating a bad fourth quarter for Wall Street and [the banks] definitely came through with that,” said Alan Johnson, managing director of Johnson Associates, whose firm publishes a widely watched compensation survey.
Johnson said that while compensation disclosures so far have reflected lower payouts, they don’t necessarily tell the full story.
“Compensation is down a lot for most, even though it doesn’t look like it,” he said, referring to previous stock awards which are included in the current figures and tend to somewhat cloud results.
When asked about his job at cocktail parties, Alan Johnson has a curiosity-piquing line.“You know those big paydays on Wall Street?” he says, typically waiting a beat to deliver the punch line. “I have something to do with them.”