Large Wall Street banks like Goldman Sachs, Morgan Stanley and others, are cutting compensation for big producers, not just laying off lower producers and back-office employees, and are requiring even the biggest producers to bring in more business for the same amount of compensation, according to a CNBC article entitled “Wall Street Slashing Pay?Even for Best Performers.”
“Put simply, in order to get your $1 million bonus before, you had to generate X amount of revenue; now it’s X plus 50 percent,” one bank compensation adviser was quoted as saying.
The securities industry entering its fifth consecutive quarter of stagnant trading income. Bernstein Research analyst Brad Hintz reportedly slashed his 2011 earnings estimates for Goldman Sachs and Morgan Stanley on the grounds that cost-cutting would not be able to compensate for lower revenues from low trading volumes.
“It’s not a pretty picture. It’s just, ‘Eat what you kill,”‘ James Freeman, founder and CEO of advisory firm Freeman & Co., was quoted as saying.
Wall Street had supposedly been revising its compensation structure to disincentivize excessive risk-taking by raising base salaries, deferring bonus payments and introducing clawback provisions discourage trades and deals that may produce profits in the short term profits but undue risk in the longer term. However, by increasing the pressure to produce even more revenues to maintain the same level of compensation, Wall Street has apparently reversed course and is now encouraging excessive risk-taking again.
The austerity measures are making some traders more cautious in other ways, according to the article. “It’s tense ? everyone is constantly looking over their shoulder,” one former fixed income trader at a large Wall Street firm who recently moved into a risk-management role, was quoted as saying, adding: “I’m not expensing lunch, and I’m taking the subway home.”
Attorney J. Boyd Page, the senior partner of age Perry based in Atlanta, said: “As management tries to cut costs to deal with inefficiencies and integration problems, brokers are facing the possibility of being fired or forced to leave. I would expect this to lead to disputes involving front-end bonuses, retention bonuses, possible wrongful termination claims, and other issues arising out of brokers’ employment agreements and the circumstances of the terminations.”
Page Perry routinely handles a wide variety of employment law matters. The firm’s employment law services range from drafting or advising clients about employment agreements and related documents to litigating or arbitrating employment related disputes. Over the years, the firm has developed particular experience and knowledge in dealing with employment law disputes associated with the securities and financial services industries.
Page Perry attorneys have successfully handled employment law disputes involving restrictive covenants and non-compete agreements, confidentiality agreements, employee bonuses and loans, constructive termination, stock option agreements, age, race and gender discrimination, and severance packages.
Page Perry is an Atlanta-based law firm with an active practice in representing individuals in employment disputes with firms in the financial services industry. In the past several years, the firm has won arbitration award for clients in employment disputes in the amounts of $1.7 and $3.9 million. For further information, please contact www.pageperry.com.