Wall Street Bonuses Set to Drop as Banks Focus on Cutting Costs

“Pay is down in a healthy market—that just tells you how much competition there really is,” Alan Johnson, managing director of Johnson Associates, said in an interview. “We’re clearly in the new normal.”

Banks have faced muted capital markets results in recent quarters amid uncertainty around geopolitics and interest rates. The industry’s healthy third quarter is unlikely to counteract the worst first half in a decade for Wall Street’s trading desks, particularly because the last three months of the year tend to be weak, Johnson said.

Crain’s New York Business / November 12, 2019

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Bonuses for Money Manager Execs Could Drop by 5%

Executives at traditional asset management firms can expect to see their 2019 year-end bonuses either remain flat or decline by 5% from the previous year, according to a report from compensation consultant Johnson Associates.

Johnson Associates’ third-quarter report added that professionals within the hedge fund and private equity industries, meanwhile, are projected to see an increase as much as 5% in their year-end payouts…

Mr. Johnson added that he expects “selective layoffs and less hiring to continue as firms buckle down on expense management,” which will contribute to “a downward impact on compensation in 2020.”

Pensions & Investments / November 12, 2019

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Most Wall Street Workers to Get Slightly Smaller Bonuses in 2019: Study

“All signs are pointing to an overall disappointing and lackluster year on Wall Street,” said Alan Johnson, managing director of the firm that did the report…

Payments are pressured by a number of factors, including increased competition among investment banks, declines in equity trading and underwriting activity this year, and overall higher expenses, in part from technology investments and hiring.

“All the big banks are well run and solidly profitable, but the investment banking businesses continue to face extreme competition,” Johnson said.

Reuters / November 12, 2019

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The Paycheck Prognosis

It used to be a straight shot from what the markets did to Wall Street and asset management paychecks. This is the first year those two have diverged significantly, according to Johnson Associates’ yearly analysis of incentive compensation…

“If you look from January 1st, the markets look terrific,” said Alan Johnson, the founder and managing director of the compensation and consulting firm, in an interview. “So lower comp will be surprising to the industry. They’ll say, ‘Hey, it’s been a great year!’ But, no, not really. It depends on the time frame. if you include the fourth quarter [of 2018], it doesn’t look so good,” he added.

Johnson said the industry is decoupling from traditional measures of success anyway, such as assets under management. 

Institutional Investor / November 12, 2019

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McDonald’s CEO Ouster Puts Pay, Severance Policies in Spotlight

Alan Johnson, managing director of New York-based Johnson Associates, said pursuing clawbacks—which he dubbed the “nuclear weapon” of pay disputes—requires careful consideration.

“If you get into these personal, behavioral issues it just gets really tricky,” Johnson said. While embarrassing episodes such as an extramarital affair, DUI, or personal bankruptcy might raise red flags, Johnson said boards must take into account “honest mistakes.”
Otherwise, companies run the risk of stifling meaningful communication with draconian responses.

“If you make the punishment so severe and so dramatic, are you going to get actual less reporting of the things that you’re trying to stop?” Johnson said, adding, “If everything is the death penalty, then perhaps the problem grows exponentially.”

Cluttering up contracts with an endless laundry list of possible infractions would probably be counterproductive, Johnson warned. Still, he sees the value in having shareholders voice their wishes via environmental, social, and corporate governance initiatives.

“I think this commentary and criticism is helpful,” he said.

Bloomberg Law / November 6, 2019

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Is It Time to Start Including Comp Ranges in Job Postings?

But Alan Johnson, managing director at Johnson Associates, a New York-based compensation-consulting firm, says he’s “leery” of including a salary range in job postings. He’s more open to the idea of companies publishing a data point—like a minimum salary—instead of a range because it’s all about managing expectations.

“If you hire someone but their salary is not at the top of the range,” he says, “then they are going to be disappointed, and that’s not a great place to start working.”

The comp-range approach could also prove beneficial for some companies, Johnson adds.

“If the range for a job is $60,000 to $90,000,” he says, “there may be a few people who would have been turned off at 60k, but you might get a few more candidates at 90k. You may get a few more people into the funnel because they are turned on by the top part of the range.”

Johnson says he expects to see more companies adopting the comp-range approach in the coming years.

“I think, with all the work on income equality and diversity, it’s going to increase in usage,” he says. “The perception is that adding comp ranges will help us treat groups more fairly. Whether that’s a good idea or not, we can debate. But it’s certainly a trend that’s going to increase.”

Human Resource Executive / September 24, 2019

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