One of the biggest problems facing City and Wall Street firms at the moment is to manage the expectations of their staff, most of whom are expecting a decent bonus. After all, many firms have enjoyed a good year and CEOs, attempting to motivate the workforce, have often banged the drum this year and confirmed how well it is all going.
The reality is, however, somewhat different. Although net profits have risen considerably this year, not much of this has generally been down to increased business activity. Profits have leapt as cost savings have kicked in and provisions for bad debts have fallen. There are genuine concerns about how quickly the recovery will come next year.
In the meantime, there is the dreaded shareholder. And shareholders, too, expect to participate in the big pay out. Firms will have to balance the amount that they share with staff in bonuses and shareholders in dividends. They will also need to retain sufficient in the business for investment and to meet a still somewhat uncertain future.
All this taken together means that staff will generally do better than last year, but, for the vast majority, in terms of cash in the pocket that might not mean too much. An average increase in bonus of 20% on last year seems to be the accepted word - but staff would do well to remember that 20% of zero is still zero.
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