Be ready to leap when the market turns
THE popular obsession with City pay has not gone away, as was in evidence recently when the news that Bob Diamond will become CEO of Barclays was accompanied by lurid headlines about the “bonus banker”. City remuneration might be a dog-whistle issue for tabloids, but it’s also a big issue for everybody who works here, especially if you are considering a move at any point in the next few months – before or after the bonus round that starts in December.
So what is the state of play? Pay-wise, things are looking up. Earlier this week professional services firm Deloitte published a report asking: “Is it business as usual for executive pay?” It concluded that in FTSE 100 companies in 2010 the median bonuses for directors of the top 30 companies were 140 per cent of salary, almost 20 per cent higher than last year and close to pre-crisis levels. For the others, they were 100 per cent of salary, again numbers reminiscent of the boom days.
Just a few days later, recruitment firm Norman Broadbent also published a report which said that we are seeing the emergence of a “bulge bracket” of top banks which “are starting to operate differently from the rest” and where pay is exceptionally high. Although bonuses are not as high as they were, there has been a compensatory rise in base pay, which has increased by 50-100 per cent in the last year, says the report.
In terms of remuneration, things are looking healthy in the top echelons of the City, then. That said, the market is still slow. But you should be aware that regulatory and commercial pressures have changed things significantly across the board. Nimble footwork is needed to make the best of the new realities. So when the time comes for that job-move, what should you be asking for?
Thomas Drewry, managing partner at executive advisory and search firm Veni Partners, says that compensation packages have become “as much about regulatory compliance as a commercial decision” and some practices have all-but vanished. For example, two-year guarantees are now far less common. Ditto dual contracts, where an employee is paid in two jurisdictions in a tax-efficient way – these were once standard for senior bankers. “These days you have to prove that you have a legitimate business connection with both countries where you are paid,” Drewry says.
Other practices have replaced these. Base salaries, of course, have increased to compensate for a loss in cash bonus and have doubled in many cases. Bonuses have a much heavier stock component than before. This means that if you are contemplating a move, then you should make sure you are confident about the firm’s long-term prospects. A mercenary move is not a good idea in this market.
Be aware too that accelerated stock vesting has recently been banned by the FSA. This was a technique whereby your stock in one company could be transferred to another very quickly, rather than taking the usual three years. However, some banks are still offering all cash sign-ons to sweeten any deals. Norman Broadbent say that buy-outs are also on the agenda, and deals worth 200 per cent of salary are not unknown.
Of all these, the most significant change is the proportion of remuneration in stock. On the face of it, this suggests that long-termism is the best policy for your career. But while it might look that way now, don’t get complacent. Once the markets return to buoyancy, then things will change again and a long stay at one employer might actually work against you.
Andrew Hanson, director of financial services at recruiter Robert Walters says: “Somebody who has worked in two or three organisations is often a more attractive candidate – they will have experience of different environments, systems, management and business structures.”
The general rule is that short-term thinking is best for your long-term career goals, if that doesn’t sound too paradoxical. The odds are that the market we see around us does not reflect a permanent change, but a blip. Sooner or later the City’s favourite recruitment technique – the tap on the shoulder – will be back with a vengeance. When business as usual does return, you should be ready for it.