“Some people are going to be let go,” Morgan Stanley Chief Executive Officer James Gorman said Thursday at the Reuters NEXT conference. “We’re making some modest cuts all over the globe. In most businesses, that’s what you do after many years of growth.”
‘Zeroed Out’
On Wall Street, bonuses and other incentives are notoriously volatile as the industry cycles through booms and busts. In the final months of the year, banks grade their workers’ performance and set bonus pools that they can share, with the most generous portions for rainmakers.
The outlook for banker bonus pools has been dimming for months. Typical deal advisers may see their bonuses drop as much as 20%, while awards to their counterparts in underwriting plunge 45%, compensation consultant Johnson Associates Inc. estimated last month.
“This is going to be a more difficult compensation season,” Jefferies Chief Executive Officer Rich Handler and President Brian Friedman warned their employees this week, “just like it will be for every firm in our industry.”
This year, banks including Citigroup, Bank of America and Barclays are considering giving dozens of their lowest performers no bonus at all -- known as getting “zeroed out,” or receiving a “goose egg,” “doughnut” or “bagel.” At Goldman, the number of bankers getting nothing could surpass 100.
A Barclays spokesperson declined to comment.
Bonus snubs are often a precursor to a firing but also sort of a dare: If a company wants to lower headcount it can throw out a bunch of them and see if enough people get the message to speed up attrition. Or, with terminations at other firms on the rise, some managers may bet that recipients will keep showing up to their desks, cheaply.
“Where else are these bankers going to go?” Keizner said. “The banks want their teams to stick around because when things turn back around the banks don’t want to find themselves understaffed and scrambling again.”
Limiting Hires
Indeed, some smaller firms may resist their normal urge to snap up talent with the outlook on Wall Street now so uncertain. Evercore Inc., for example, is limiting replacement hires for those bankers who leave.
The lower payouts to bankers may not inspire much sympathy outside finance.
In New York City, the securities industry’s overall bonus pool will decline 22% from last year, when the average payout was $257,500, according to estimates from the state’s comptroller, Thomas DiNapoli.
That would still be more than four times higher than what a typical private sector employee earns in the city.