Banks are getting a headache from bonus fatigue

Julian Harris
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Goldman Sachs is among the banks with employees disgruntled about their bonuses (Source: Getty)

Global hedge fund bosses are receiving their lowest pay in a over a decade, while bankers in London are increasingly unhappy about the size of their bonuses. I know, I know – cry me a river.

But while pay levels in high finance may not trigger sympathy among the broader British public, it is important for bosses to keep an eye on trends and question how effective, or ineffective, their remuneration policies have become.

In banking, the topic is increasingly pertinent. Lenders and their staff have had to adapt to bonus caps, the stubbornly tough climate for investment banks, and a widening gap between the fortunes of financial giants in the US and Europe. The fallout is notable.

Read more: Lloyds bankers' bonuses to overtake RBS' this year

Pay data firm Emolument measured the “happiness” of bankers at six global behemoths over the past two years. The proportion of employees who said they were “happy” with their bonus dropped at five of the banks, and remained static at one.

Not a single bank recorded more content staff this year, compared to last. The proportion of “happy” bankers plummeted from 29 per cent to 16 per cent at Goldman Sachs, according to the data. At Citigroup the level sank from 26 per cent to 19 per cent. Credit Suisse fell from 27 per cent to 20 per cent. Interestingly, satisfaction does not necessarily correlate with the size of a banker’s bonus. Staff at American banks are supposed to be motivated by significantly sharper incentives, yet on the whole are no happier than bankers at their relatively parsimonious European peers.

Read more: New Year squeeze for bank bonuses

Emolument’s Alice Leguay, who spent nearly six years at an investment bank herself, believes it is a case of poor communication, and a failure to manage expectations. Bankers working for big firms that are doing pretty well expect a chunkier piece of the pie than they end up receiving. They suspect colleagues are earning far more. To some extent younger bankers have trouble accepting that the so-called glory days are unlikely to return.

Surrounded by an army of compliance staff, many bankers no longer enjoy the fast-paced roles of yesteryear. They are often maligned in social circles for their choice of career. They see peers shift to more exciting jobs in tech, private equity or hedge funds.

Read more: Reform of the City’s bonus culture is long overdue

In this environment, banks can no longer rely on the promise of bumper bonuses to attract, and retain, the cream of the crop. They must abandon the unhealthy, stuffy, corporate secrecy surrounding their employees’ pay rates, and start an open conversation with staff about how to offer more fulfilling and compelling careers.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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