Bloomberg reported today that some financial institutions may be freezing base pay for bankers after a less-than-stellar 2011. The article named European financials Deutsche Banks and Credit Suisse as institutions that are considering the measure.
Raising base compensation annually is a financial industry norm because it plays a key role in keeping top talents at the firm from competitors who may try to offer more attractive incentives. For junior bankers, that pay raise could be anywhere from 15% to 20% yearly.
But in such troubled times for financial institutions—where pay cuts and no bonus are a real possibility—a firm’s true value to its employees may lay in the fact that it plans to do nothing at all. And that’s exactly what JP Morgan is doing. Nothing.
Sources briefed on JP Morgan’s pay decisions told Bloomberg that the bank had no plans to change its pay practices.
That’s a smart move on JP Morgan’s part, because other financials have their eyes on any possible pay changes at Goldman Sachs and JP Morgan, most likely in hopes of luring away that top talent.
The news is particular timely considering that JP Morgan CEO Jamie Dimon discussed the possibility of losing talent from the upper echelons of management to competitors as he remains firmly rooted to his position as head of the bank. Dimon remained tight-lipped about compensation at JP Morgan, but did add “we’ve always looked at compensation over the long run, we don’t look at one year in particular.” He admitted that JP Morgan losing employees to competitors is just a fact of life, and seemed at peace with the idea.
But for now, it looks like that won’t be happening.
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