Base salaries for a number of Goldman’s London investment bankers just got cut, according to Financial News.
Those affected: staff on the managing director and partner level.
Remember their pay was higher than Goldman bankers in New York’s pay because of the bonus tax. Two years ago, when the bonus tax was enacted, Goldman started paying higher base salaries to make up for it.
Reuters says fewer than half of the firm’s 6,500 employees in London were given the two-year pay rise. Now it’s gone.
Here’s why pay just got cut:
- In 2010, the average compensation of each of Goldman International’s 5,956 workers, was $818,999 last year. That’s 90% higher than Goldman bankers got elsewhere ($430,700 on average)
- Base salaries were raised 30%-80% for London bankers because of the bonus tax
- Pre-tax profits fell 14% in the first half of this year compared to the same period in 2010
- A 37% drop in FICC revenues
- A 27% improvement in investment banking revenues wasn’t enough
It may sound like it, but this is not the end of the world for the bankers. Their base salaries were only raised to cope with Alistair Darling’s one-off bonus tax. Plus, this was in their 2009 contracts, so they had ample time to prepare.
However it’s yet another sign that bankers salaries rely heavily on bonuses for a reason. Their banks can afford to pay them extremely high sums only in good years, when the bonus is kind of like, or in some people’s cases, exactly like, a profit-share.
Then in bad years, banks can afford to lay off fewer people because bankers receive low bonuses. But the implementation of the bonus tax complicated the pay structure. To keep them on, banks had to pay employees high salaries that they might not have been worth