Bonus Blues And Merger Views

Don't spend any of this year's bonus money yet. The truth is, your firm's bonus pot might be shrinking a little more each day.

And the current situation is just about summed up by two quotes featured in The Wall Street Journal this week. Gary Goldstein, CEO at executive recruiter the Whitney Group, has said that 'business is looking much more tenuous now, and people are cautious about next year, too'. And Russ Gerson, the head of AT Kearney's financial markets recruiting group, said that 'earlier this year I would have said that total compensation would go up 15% to 20% on average, and a lot better for some top performers. My expectation now is that compensation is going to be up minimally - 5% to 10% - and could be revised downward if existing trends continue'. Oh dear.

Now the US Securities Industry Association has just polled 89 firms to try to get a handle on how bonuses will come out this year. Admittedly, a lot of the larger firms didn't participate in the survey, but the results are some indication of what staff should expect. And the bad news is that one third of the firms said that bonuses would be unchanged on last year. As far as the big firms are now concerned, the smart money is with Gerson on a 5% to 10% increase range. And the good news for recruiters, of course, is that low bonuses may breed discontent and next year could see staff playing musical chairs.

Another interesting couple of statistics to come out this week relate to Goldman Sachs and Morgan Stanley. According to Bloomberg, both firms had set aside $8bn to the end of August to pay for this year's total comp and benefits. That's said to be an average of $150,000 for each Morgan Stanley employee and a whopping $400,000 for the average Goldmaner. Trouble is, of course, that there is no such thing as an average employee. In reality, especially at Goldman, more is likely to go to the big hitters. But these figures do emphasis just what kind of differences there are likely to be in compensation at rival firms this year.

Having wound everyone up on bonuses, let's try to end on a more positive note. If Cees Maas, ING Groep's chief financial officer, is right, then staff needn't worry about cross-border European mergers for a while yet. He has said that 'I think that cross-border mergers are still complicated. Synergies are difficult to reap....The only advantage would be sheer size'. Maas did caution, however, that if some of the big American banks started sniffing around in Europe, then all of a sudden size would matter.

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