March 23, 2023

DealBook: Fewer Bonuses for Bankers in Britain

Banks at Canary Wharf in London.Andy Rain, via European Pressphoto AgencyBanks at Canary Wharf in London.

LONDON – One in three bankers in London walked away empty handed from the last bonus round, a survey by the recruitment firm Morgan McKinley showed on Thursday.

The percentage of bankers who received a bonus for last year fell to 68 percent from 82 percent in 2011, the lowest level since the survey started to track the data five years ago. Of those who did receive a bonus, 22 percent said it was higher than last year and 41 percent said it was unchanged, the survey showed.

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“There is much greater acceptance of the downward pressure on cost management and the knock-on effect on overall reward,” Hakan Enver, a director at Morgan McKinley, said in a statement.

Mr. Enver said the research showed a ”culture change” across London’s financial center. “Those receiving bonuses are now fewer in numbers, the amounts being paid out are dropping and individuals are less satisfied,” he said.

About 36 percent of bankers said they were satisfied with their bonus for last year, compared with 42 percent a year earlier. Salary increases have also become less common. The percentage of financial professionals whose pay increased fell to 36 percent last year from 47 percent in 2011, the survey showed.

Banks have been shrinking their bonus pools to reduce costs in the face of higher capital requirements by regulators and a more difficult economic environment. Pressure on banks also comes from lawmakers. Amid opposition from Britain, the European Union voted in April to cap most banker bonuses at Europe’s biggest financial institutions at one year’s base salary in an effort to curb risky behavior in the industry.

But Morgan McKinley said its survey showed a “lack of concern around the bonus cap” in London’s financial district. The majority of financial professionals surveyed would not be affected because their bonuses are below the level of their salaries, the firm said.

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E.U. Officials’ Salaries Draw Fire

BRUSSELS — Days ahead of a summit meeting where leaders of the European Union’s 27 member states are to wrestle again with a proposed seven-year budget for the bloc, an E.U. spokesman was forced to defend the salaries pulled down by some officials.

At a time when many European governments have been compelled to impose stringent budget cuts, the issue of salaries and perquisites for E.U. officials has resonated. In November, Prime Minister David Cameron of Britain called on officials in Brussels to share the pain that austerity measures have brought to millions of Europeans.

On Sunday, the German newspaper Die Welt am Sonntag stoked the controversy by comparing the salaries of some E.U. officials to the compensation paid to Chancellor Angela Merkel.

Anthony Gravili, a spokesman for the European Commission, told a news conference on Monday that such figures were flawed.

“It’s a totally unfair comparison,” said Mr. Gravili, who offered a lengthy rebuttal of the article but did not mention the newspaper by name. “No official earns more than Chancellor Merkel.”

Mr. Gravili criticized comparisons of Ms. Merkel’s monthly salary, excluding allowances and other additions, to E.U. salaries including allowances and benefits. European Commission show that the monthly base salary of the most senior E.U. official is €18,370, or $24,830. Ms. Merkel’s monthly base salary is €21,000. Of that, €17,000 is her pay as chancellor, while €4,000 is her reduced salary as a member of the German Parliament, Mr. Gravili said.

Once Ms. Merkel’s basic allowances as both chancellor and Parliament member were included, Mr. Gravili said, the chancellor’s monthly pay was about €25,000.

E.U. officials generally pay low taxes, but Mr. Gravili said he did not have the figures available to say whether this would raise the officials’ after-tax income above Ms. Merkel’s. Inge Grässle, a German member of the European Parliament and a member of the body’s budgetary control committee, said that the highest-paid E.U. official paid taxes equivalent to about 25 percent of their gross salary.

Germany contributes most to the E.U. budget, which was about €135 billion last year.

E.U. officials receive steady criticism about waste and bloat but only about 6 percent of all spending goes to the Union’s administration, which is staffed by 55,000 people, including 6,000 translators, most of them in Brussels.

European political leaders will gather in Brussels on Thursday to consider a budget proposal of roughly €1 trillion for 2014-2020. The proposal trims 1 percent from the European Commission’s requested spending for administrative costs. Britain has argued for deeper cuts, saying that those costs, while relatively small in comparison to the overall E.U. budget, are symbolically important.

Unlike E.U. officials, the 27 members of the European Commission are political appointees. Their salaries are much closer to those of national leaders like Ms. Merkel, and in some cases may exceed them.

José Manuel Barroso, the president of the commission, is paid a basic monthly salary of €25,351, a residence allowance equal to 15 percent of that salary, and additional allowances for expenses like running a household and schooling for children. The seven vice presidents of the commission earn basic monthly salaries of €22,963.

Mr. Gravili said he did not have the figures available to comment on the comparison of the commissioners’ after-tax salaries with Ms. Merkel’s.

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Bits Blog: Yahoo’s Mayer Gets Hefty Pay Package

Yahoo said in a regulatory filing on Thursday that it would pay Marissa Mayer, its new chief executive, a base salary of $1 million a year — and then some.

Ms. Mayer, 37, is eligible for a $2 million annual bonus if she meets the company’s financial targets and up to $4 million if she exceeds them. She will also receive $12 million in stock this year, half of it in the form of restricted stock, the remainder in options.

To make up for what she left on the table at Google, Yahoo will pay Ms. Mayer an additional $14 million in stock. And it is giving her $30 million in stock as a one-time “retention equity award,” vesting over a five-year period.

Yahoo is paying Ms. Mayer more than it initially offered her predecessor, Scott Thompson, who was offered a $1 million base salary, a $2 million bonus and a stock package worth $22.5 million.

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DealBook: Big Pay Day for Yahoo’s New C.E.O.

Scott ThompsonReutersScott Thompson

Scott Thompson is getting a very friendly welcome to Yahoo.

The Internet pioneer disclosed in a regulatory filing late on Friday what its incoming chief executive stands to receive when he begins work on Monday or soon thereafter. It’s a package with a hefty amount of stock grants worth about $22.5 million, atop a $1 million annual salary.

Here’s how Mr. Thompson’s golden welcome mat breaks down:

  • A base cash salary of $1 million
  • An annual stock bonus with a target of 200 percent of his base salary, or $2 million
  • An annual stock grant for 2012 set at $11 million
  • A onetime “inducement” stock grant worth $5 million
  • A “make-whole” cash bonus of $1.5 million, to make up for payouts he is forfeiting by leaving his current post as president of eBay‘s PayPal unit
  • A “make-whole” restricted-stock grant of $6.5 million, for the aforementioned reasons

Total: $4.5 million in cash, $22.5 million in stock.

Mr. Thompson won’t be receiving that total value right away. The make-whole stock grants, for example, will completely vest next year.

He will receive other perks as well, including four weeks of paid vacation and reimbursement of up to $25,000 in legal fees connected with negotiating his employment contract. And if he is terminated without cause, his make-whole stock grants will fully vest immediately.

The amounts are fairly comparable to what Mr. Thompson’s predecessor, Carol A. Bartz, received when she joined Yahoo in 2009. The company disclosed in January of that year that Ms. Bartz would receive a $1 million salary and stock and cash grants worth $19 million. She also received stock options worth 5 million shares that were exercisable at $11.73.

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DealBook: Barclays Posts Weaker Profit as Investment Bank Slips

The British bank Barclays reported Wednesday that weaker investment banking performance caused its first-quarter profit to fall, setting the stage for sharp questions about its bonus plan at this year’s shareholder meeting.

The bank, based in London, posted £1 billion, or $1.65 billion, of net profit for the first three months of 2011, down 5 percent on the year-earlier figure. Top-line revenue fell 8 percent to £7.4 billion.

Barclays Capital, the investment bank, had revenue of £3.3 billion, down 15 percent from a year earlier, owing to a 22 percent decline in the unit’s fixed income, currency and commodities business. But revenue from the equities business gained 11 percent as stock markets rose.

Barclays noted that if a £351 million charge on its own debt were excluded, it would have posted £2 billion of overall pretax profit, up 10 percent.

‘‘We have made a good start in 2011 in a challenging external environment,’’ Bob Diamond, the chief executive, said in a statement.

Barclays executives, who are trying to revise the bank’s bonus policies, were preparing for hostile questioning later Wednesday at the company’s annual general meeting.

The Association of British Insurers, whose members include major institutional shareholders, has called on its members to closely review remuneration plans that would, among other things, give Mr. Diamond a base salary of £1.35 million — a 20 percent increase over that received by his predecessor, John Varley — and pay some bonuses with contingent capital securities, or ‘‘cocos.’’ Such bonds can be converted into equity if the bank runs into trouble, allowing it to add to its capital cushion.

Pensions Investment Research Consultants, a shareholder advisory group that had already criticized Barclays over what it characterized as “the complexity and opacity” of its remuneration policy, urged investors to seek answers from the bank over what appeared to be “£1.4 billion of bonuses awarded and the tax thereon that has not been put through the profit and loss account.”

The Independent Commission on Banking, a body backed by the British government, called this month for Barclays and other systemically important banks to hold more capital and protect individual clients from losses, but stopped short of calling for a separation of their retail and investment banking businesses.

While regulators have identified over-leveraging as one of the causes of the financial crisis, banks have resisted efforts to raise capital requirements, saying the measures would reduce their profits.

Mr. Diamond said that continuing the ‘‘constructive dialogue’’ with the I.C.B. was ‘‘an important priority’’ for the bank.

‘‘We are determined to play a responsible role in the formulation of the reform agenda and to facilitate economic growth in the U.K. by providing access to credit-worthy individuals and businesses,’’ the statement said.

Barclays said it raised its core Tier 1 capital ratio, a measure of its ability to withstand financial shocks, to 11 percent at the end of March, up from 10.8 percent at the end of December.

The bank said results were hit by a £532 million impairment charge the bank booked on Protium Finance, a holding vehicle for credit market assets that Barclays had sold to former employees.

The bank said it was now buying back the Cayman Islands-based vehicle.

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