Tuesday, November 13, 2007

Pay at Investment Banks


Bloomberg suggested the average employee at Goldman will receive a bonus of $397,707 this year, $187,000 more than their counterparts at Lehman Brothers and more than twice as much as bankers at Morgan Stanley and Merrill Lynch. But it appears Goldman’s generosity doesn't benefit all employees equally. One former staffer turned headhunter says the bonus pool's bulk is reserved for managing directors and partners. They receive around 40 percent of the total. He says the remainder of Goldman's staff receives slightly more than the industry average, but nowhere near double.

“For associates, vice presidents and executive directors, pay is roughly comparable, You only start to see the really big payouts when you make managing director or partner.”

This was confirmed by headhunters in London. “It’s crazy to say that associates, vice presidents and directors at Goldman are paid twice as much as anyone else,” says one. “At the vice president level they pay more than most other banks, but not much more than 10 percent more. Morgan Stanley and Merrill paid roughly the same last year.”

Bloomberg arrived at its figures by examining the total proportion of revenues banks have paid out in compensation over the past five years. The news service then estimated revenues for this fiscal year and extrapolated total compensation on that basis. Bonuses were assumed at 60 per cent of the compensation total. The average predicted salaries and bonuses:

Goldman Sachs: Bonus: $397,707; Salary: $261,239 Morgan Stanley: Bonus: $154,556; Salary: $103,038 Merrill Lynch: Bonus: $174,683; Salary: $116,456 Lehman Brothers: Bonus: $210,696; Salary: $140,464 Bear Stearns: Bonus: $203,077; Salary: $135,385


It is a public company. But Goldman maintains the status of "partner managing director" for its most elite subgroup of MDs. Those partner MDs, They were compensated an average of $8.6 million each last year. They make up a little over 1 percent of Goldman's total work force, but share about 15 percent of the annual bonus pool.


Goldman Sachs promoted a record 299 individuals to the coveted managing director title, effective Dec. 1.

The addition of this latest class raises Goldman's total MD count to 1,767, according to Financial News, out of a worldwide work force of 29,905.

This year's MD class is 12 percent larger than the number awarded the title last year. In 2006, however, Goldman named 115 new "partner managing directors" - a still-loftier position. Partner MDs, anointed every two years, reportedly receive a $600,000 base salary and averaged $8.6 million total compensation last year. At present there are 383 partner MDs at Goldman.

According to Financial News, 19 percent of the new MDs are women, up from about 15 percent of the 2006 class, and about 11 percent of last year's new partner MDs.

For the first nine months of 2007, Goldman set aside $16.9 billion for compensation expenses, exceeding last year's full-year record of $16.5 billion. The bank posted record profits of $9.3 billion last year.


25 Oct 2007
Goldman Sachs has promoted a record 299 people to managing director this year, about 12% more than in 2006, as the Wall Street bank allocated nearly $17bn (€11.9bn) for salaries, benefits and bonuses in the first nine months of the year.

In this year’s class, 19% of the new managing directors are women, compared to approximately 15% in 2006. About 11% of the 115 partner managing directors named last year are women.

The bank promotes managing directors annually and new partners every other year.

Goldman employs 29,905 staff, including 1,767 managing directors, of which 383 are partner managing directors.

One of the new managing directors is Huntley Garriott, who as a vice president helped advise on Legg Mason's asset swap with Citigroup. Last week, Garriott advised Commerce Bank in its $8bn sale to TD Bank Financial Group.

Partner managing directors at Goldman earn an average base salary of $600,000, and share about 15% of the annual bonus pool.

The promotions will go into effect December 1.


Top money managers earn such huge incomes that even when their compensation is mixed with the much lower pay of clerks, secretaries and others, the average pay in investment banking is 10 times that of all private sector jobs, new government data shows.

Investment banking paid an average weekly wage of $8,367, compared with $841 for all private sector jobs, the Bureau of Labor Statistics said in a routine report issued Thursday.

The report also showed how far ahead hedge fund managers are of other investment bankers in making money.


In Fairfield County, Conn., home to many hedge funds, the average pay was $23,846 a week. In Manhattan, with a much broader mix of investment banking firms and seven times the number of employees pay was much less, averaging $16,849 a week in the first quarter of 2006.

Nationally, investment banking accounted for just 0.1 percent of all private
sector jobs, but it accounts for 1.3 percent of all wages, the bureau said. Of the nation’s 132.5 million private sector jobs, 173,340 were in investment banking in the first three months of 2006, the report stated.

Labor Department data shows that the average hourly wage across all jobs has been slipping since February, when it was $17.42 an hour.

October 2007
Merrill Lynch Cuts Pay due to losses in the third quarter

Merrill Lynch announced that it cut worker compensation in half in the third quarter, which means big bonuses could suffer this year. The investment firm spent $1.99 billion on compensation during the July-September period compared to $3.94 billion during the same quarter last year and $4.76 billion during the second quarter of this year.

'Merrill Lynch remains focused on paying its best performing employees competitively,' the company said in a statement. 'In the same vein, it may be necessary to accrue compensation expense at a higher level in the fourth quarter to ensure it can appropriately reward employees whose performance will drive future growth.'


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