Managers Reevaluate Compensation After M&A

Mergers and acquisitions are prompting asset managers to reevaluate compensation — a process that can cause key personnel to flee if new pay plans don’t live up to their expectations.

Typically when asset management firms merge, they try to combine their compensation structures, says Alan Johnson, managing director at Johnson Associates, a compensation consultancy.

“If you’ve got enough time to work on it, you try to say, ‘let’s try to get the best of each one of them so they may not simply be choosing one or the other [but] … the best pieces of each one of the two firms.’”

Fund Fire / July 1, 2019


Jet Perks: Which Travel Bills Were the Priciest?

Alan Johnson, CEO of compensation consultancy Johnson Associates, finds Facebook, and particularly Zuckerberg, to be brazen in undertaking personal expenditures that are a cost to the company.

“Facebook, of course, they don’t care what anybody thinks,” he says.

Johnson is also skeptical about the aircraft perk as a security issue.

“He could reimburse the company, and he wouldn’t show up on the list; he doesn’t care about showing up on the list,” Johnson says.

He also notes that the optics don’t quite line up. Zuckerberg’s facing such severe security threats that the company covers the cost of guarding against them gives rise to questions about his personal life. Reports earlier this month show that Zuckerberg just added a $59 million estate in Lake Tahoe to his personal real estate portfolio, as The Wall Street Journal reports.

Add to that the fact that Zuckerberg’s aircraft perks nearly tripled from the disclosed $872,000 in 2016, and “it makes you shake your head like, ‘how much time are these people really working?’” Johnson says.

Johnson notes that the top-spending execs are outliers, and he acknowledges that “airplane perks at a moderate level are OK.”

“Airplane perks continue to be under pressure. It’s a wonderful perk for executives, but shareholders don’t like it,” Johnson says. Johnson explains that it depends on what kind of agreements the company has in place. If it’s an aircraft they own, “you’re not going to stop using it,” he says. But if it’s time for a new plan or a lease is up for renewal, companies are asking, “Is this something we need to do anymore?”

AgendaWeek / May 24, 2019


Hedge Pay Sputters, Except for the Seven-Figure Quants

Following the first quarter, alternatives compensation is projected to remain flat or see some modest increases, according to a report from Johnson Associates. While hedge fund performance has ticked back up after a tough 2018, high watermark challenges around performance fees remain, and that could lead to a disconnect between people’s expectations and their paychecks, says Alan Johnson, managing director of Johnson Associates.

“They’ve had a rough four to five year period,” he says of the hedge fund space. “In pay, we are seeing flat to maybe up a little bit.”

“If you’re the right quant in the right spot, you can make over a million,” Johnson says. “It’s not a shocking number anymore.”

More shocking in a way, Johnson says, are early career technologists who can command over $200,000. “Firms are really, really willing to pay for the right talent. It’s not so much seniority anymore,” he says.

Fund Fire / May 22, 2019


Uptick in Market Flattens Incentive Compensation

Asset managers’ incentive compensation are shaping up to remain flat in 2019. This news is sure to be met with disappointment, but Alan Johnson, managing director at compensation consultancy Johnson Associates, says that things could have been a lot worse.

At the turn of the year the first quarter incentive compensation scenario looked a lot more somber, but the market rebound improved the forecast, Johnson says.

“We were thinking that compensation would be down in the asset management business for 2019. So, the very nice market uptick in the last four, five months changed it the outlook of being negative to flat,” he says.

Still, flat incentive compensation packages can be hard to swallow.

“The challenge is to manage people’s expectations because, the results kind of made a ‘V,’ they went down in the fourth quarter, they are up in the first quarter, but it gets us back to break even,” Johnson says. “Your pay is not going to be up if the industry is kind of flattish from here to the end of the year.”

Fund Fire / May 9, 2019


Private Equity Takes an Early Lead in 2019 Bonus Race

Alan Johnson, managing director at the consultancy, said: “An emerging trend worth noting is the clear movement of incentive plan designs towards business/unit objectives with less focus on global/overall firm results.

“With the advantage of hindsight, plans had over-emphasized an ‘all for one’ philosophy, which can be less effective in more challenging environments.”

Financial News / May 8, 2019


CEO Pay Mixed in Asset-Challenged Year

CEOs of the country’s largest asset managers, and megabanks with asset management divisions, are finding themselves in the hot seat over their high earnings relative to those of their employees.

The first wave of CEO pay ratio disclosures began last year, drawing scrutiny from Congress as the industry marked a decade since the 2008 financial crisis. Meanwhile, a Pensions & Investments analysis of proxy filings for 11 firms found that top executives received a mix bag as far as raises vs. pay cuts last year.

Overall, five CEOs saw their total compensation drop, while six received a bump in pay over 2017…

Alan Johnson, managing director and president of compensation specialist Johnson Associates Inc., New York, said he expects CEO pay to vary, with slightly more firms raising pay in 2018, despite the down fourth quarter. Asset managers will look at financial and investment results, as well as the company’s ability to attract new assets when assessing compensation, however, he added.

Pensions & Investments / April 29, 2019