The financial sector is known for its large bonuses, and those that work for financial institutions may be forgiven for assuming that if the bank where they will posts strong results for the year, their bonus would see a corresponding increase. However that theory does not always hold true. An analysis performed by salary benchmarking site Emolument shows that the expected linear relationship between earnings and bonuses is not manifested at London banks.
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Average bonus over total M&A figures
In order to rank major banks in terms of fairness, Emolument took the 2014 total M&A income of the particular bank and divided it by the average bonus paid to a director at the banks. UBS was top of the league for fairness, followed by Credit Suisse and Rothschild. Deutsche Bank came in fourth, with Citigroup and JP Morgan Chase just behind.
Goldman Sachs employees received the lowest bonuses relative to the bank’s total M&A income, with Bank of America Merrill Lynch and Morgan Stanley not much fairer to their directors.
Fairest banks: Directors now know how little reward is linked to performance
It must be said that Credit Suisse employees were rewarded handsomely, with directors receiving a bonus of £215,000 despite relatively weak M&A figure of £86,000,000,000. The fairest bank of those surveyed, UBS, paid out a bonus of £195,000 to directors, even though the bank recorded just £73,000,000,000 in total M&A transaction values.
It may be time to reassess the popular perception that banks are tightly run profit-making machines, because these figures make Credit Suisse and UBS look positively generous.
Although directors at Goldman Sachs are probably not complaining too much about being paid a £187,000 bonus, this latest research from Emolument may see them petitioning senior executives for fairer bonus payments. BAML and Morgan Stanley both paid bonuses in excess of £200,000, but their respective figures could also be interpreted as being unfair given the huge values of M&A transactions at the banks.