Thursday, December 10, 2009

The Real Story on Bonuses & Value Provided

Me Likey.  However this news will only contrast how powerful the finance lobby is in U.S. as it will never happen here.

Bankers furious at UK bonus supertax

Bankers in the City of London reacted with fury to UK government plans to levy an immediate 50 per cent supertax on’ bonus pay-outs, saying the move played into the hands of rival financial centres.

France to impose tax on bank bonuses

President Nicolas Sarkozy is to follow Britain’s lead and impose a one-off tax on bonus pay-outs by banks operating in France.
The French government is still working out the details, but intends to bring Paris in line with London by forcing banks to pay 50 per cent in tax on bonus pay-outs for 2009 above €27,000.

As a former worker on Wall Street let me provide some details on how the bonus structure on Wall Street works.

I was a Senior Analyst at a top 5 investment bank.   Total compensation was a combination of a base salary, and a bonus.  Bonuses were usually a combination of cash and restricted stock.

Base salaries today range from $120k to $150k for senior analysts, possibly higher as i have been out of the industry a few years.  In addition, bonuses ranged from 100% to 200% of the base.  Managing Directors and VPs have base salaries in the $200s and bonuses multiples of that.

The question though is this - does the Wall Street employee provide a corresponding value to the salaries? No.  In my opinion, my job and those of most analysts and senior analysts could be performed by an average finance graduate and unfortunately, even better by a finance graduate coming out of India.

And that is the reason for the outrage amongst Americans.  Wall Street salaries have no connection with performance.

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