Investment banks get creative in employee pay

"I got me some Nortel shares! Whoot! Whoot!"

The Wall Street Journal is reporting that bankers and traders at Bank of America are taking the company’s depressed shares as part of their compensation. Bonuses above $100,000 will be paid 25% in cash and the remainder in stock, which will be immediately vested. Typically bonuses are paid in cash and restricted stock; however, the cash portion has been reduced dramatically this year.

Other banks have gotten creative with their bonuses this year, with the Journal highlighting:

1. Morgan Stanley (MS): Cash bonuses were capped at $125,000 and any amounts over that were deferred to 2012 or 2013. Traders and bankers, particularly those in fixed income are rumored to be looking at paycuts in the neighborhood of 30-40%;

2. Goldman Sachs (GS): Sources have said that partners and high level bankers and traders have seen their pay cut by 50-60%;

3. J.P. Morgan (JPM): The company cut its banking compensation pool by 9%, but total compensation increased by 3%. CEO Jamie Dimon has said the bank does “nothing special” regarding compensation; and

4. Credit Suisse (CS): Perhaps the most interesting, and similar to its 2008 compensation model, the brokerage is looking to pay its employees with structured products created by derivatives of assets on the company’s balance sheet. It’s a fixed income product with a nine year term paying a coupon of 5.0-6.5% per year. Credit Suisse will absorb the first $500 million if the products lose money. In 2008, they packaged toxic mortgage assets near the bottom of the market and used them to pay bonuses, a strategy which proved to be profitable for employees.

Bank of America (BAC : NYSE : US$7.30), Net Change: -0.05, % Change: -0.68%, Volume: 264,537,192

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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