Jamie Dimon on the future of banker compensation
Are we at a compensation inflection point in the banking industry? The conventional wisdom is that the glory days of fat compensation are over.
This view was eloquently expressed at the recent Goldman Sachs bank investor conference by Kenneth Jacobs, the CEO of Lazard. As quoted by Financial News, he said: "As leverage comes down, risk is taken out of the system and banks need to set aside more capital for every trade there will be real pressure on revenues and banks need to either get out of certain businesses or cut costs by laying off people or reducing compensation. We think this is a secular trend."
At the same conference, JPMorgan Chase CEO Jamie Dimon offered some counterpoint, saying that"The payout ratio to employees in highly capital intensive businesses such as auto manufacturing is low while in 100 percent people businesses it is high and banks are in between. Most banks are risk adjusting compensation, which has come down already, and although things that drove compensation up, like high leverage, will not return, investment banking will always be a highly paid business."
My sense is that they are both right. This year will no doubt prove to be a lean year and next year may be just as tough. But at some point, the industry will find a way to get its growth back. We're not sure what the next big driver will be, but there will be one.
- here's the article