Banker bonuses take a hit. Plus: Bank mergers face hurdles, Adam Neumann wants WeWork back, and more

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Investment bankers had hoped that significant bonuses could return in 2023 — but they were mistaken.?

Bonuses dropped by as much as 25% for the year, according to compensation consultancy Johnson Associates.?

“Even in the best of times, Wall Street employees can find reasons to nitpick about their bonuses. But this year stung,” The Wall Street Journal writes.?

In recent weeks, banks have been sharing the news with their employees, whose compensation in many cases is largely dependent on bonuses, which can be several times their base salaries.?

“After a terrible ‘22, people were hoping that things would be a lot better — but they weren’t,” Alan Johnson, CEO of Johnson Associates, tells The Finance Files. “Most people were pretty disappointed.”?

Contributing to shrinking bonuses were lower levels of M&A activity, high interest rates and geopolitical risks. The global fee pool for investment banks dropped to $67 billion in 2023, the lowest in a decade, according to Dealogic. Two years prior, it was almost double that, The Journal reports.?

Johnson says that, for many bankers in M&A, bonuses for 2023 could be less than half of what they received in a year like 2021. “If you made a million-dollar bonus in ‘21 and now you’re making $400,000 — compared to the real world, these numbers are a huge amount of money, but it’s still a heck of a lot less than a million.”

Ruth Thomas , pay equity strategist at Payscale, says that investment bankers are “fairly attuned” to the varied pay rates that are tied to market performance. However, she believes, “there is a possibility that roles in hedge funds and private equity may be more attractive” as a result.

Johnson expects that many finance professionals will look for new jobs after the latest round of announcements, but “unfortunately, for the ones who are looking, there are not that many jobs.”

He says firms are always willing to talk to candidates they consider “superstars,” but “if you’re good or great, it’s going to be hard to find a better job somewhere else.” In other words, “there will be a lot of people locked in.”

For those sticking it out, Johnson says next year should look better for pay and job mobility.

Not every business was hit as hard as those in dealmaking, Johnson notes. Private credit did “pretty well,” and wealth management businesses within big banks performed better than other lines of business across the finance sector, he says.

Meanwhile, of the major banks that have reported executive pay for 2023, the changes are mixed. According to Johnson Associates principal Chris Connors , executive compensation within financial services will range up or down about 5%, but will generally be flat compared to 2022.?

Increasingly, executive compensation is determined more on the basis of corporate objectives or “a scorecard approach,” Connors adds, “as opposed to moving up or down in lockstep with the broader incentive pools.”

JPMorgan Chase awarded CEO Jamie Dimon about $36 million in pay for 2023, up from $34.5 million the previous year. The bank has been a bright spot for the industry, as competitors have slashed thousands of jobs amid declining profits. JPMorgan reported record profit in 2023 and announced Tuesday that it will open 500 bank branches over the next three years.

Morgan Stanley CEO James Gorman’s pay jumped to $37 million for his final year at the bank’s helm, up from $31.5 million in 2022. And Wells Fargo bumped CEO Charles Scharf’s pay to $29 million from $26.5 million. At Bank of America, CEO Brian Moynihan’s pay was cut by 3% — to $29 million.

OCC Acting Comptroller Michael Hsu proposed new rules for bank mergers — just in time for the expected flood of … bank mergers.?

In remarks last week at the University of Michigan, Hsu explained that the Office of the Comptroller of the Currency wants to “remove expedited bank merger review procedures and provide transparency around the features of merger applications and indicators that are consistent with and inconsistent with approval.”

As it stands, certain applications are automatically approved if they qualify as “business reorganizations.”?

Hsu said that while merger applications “exist along a spectrum,” the majority “require varying degrees of scrutiny and multiple rounds of inquiry.”

Therefore, the OCC is adding provisions to give closer scrutiny to these mergers, with one exception being that the agency would retain the right to expedite acquisitions of failed banks. With the new proposal, the OCC will consider banks’ size, financial conditions, Community Reinvestment Act ratings, and effectiveness of Bank Secrecy Act and anti-money laundering programs.?

In some ways, the proposal is “simply a more transparent codification of existing agency practice and views,” Morgan Lewis attorneys wrote in a blog post .??

On the other hand, it “represents another step in the continuing evolution toward increased scrutiny in how bank merger applications are reviewed,” they said. “By removing the availability of expedited processing, the OCC seems to be signaling that even internal transactions that are essentially internal business reorganizations may be subject to increased scrutiny, extended processing timelines and uncertainty that is more typically applied to true M&A transactions.”

The OCC is now seeking public comments on the proposed rules.

Michele Alt , who spent two decades as counsel for the OCC and now is co-founder and managing director at Klaros Group, says the proposed plan will make it more challenging for banks to combine.

“It’s a curious move on the agency’s part,” she says, “given that the number of merger applications has dropped steadily. In that practice, the OCC has plenty of flexibility to calibrate its scrutiny level to the level warranted by any particular application.”

The number of merger applications has fallen to 18 last year from 51 in 2019, she notes.

However, Alt says, the proposal does provide “helpful indicators of how the agency will identify applications that are likely consistent with approval and applications that raise supervisory or regulatory concerns — which will be very useful to those preparing applications going forward.”

To Hsu, there are two risks with mergers: “One risk is that we approve too many mergers, and therefore we're approving bad mergers,” he said in an interview with Reuters. “The other risk is we approve too few mergers, and therefore there are good mergers that should happen that aren't. The purpose of being transparent is to encourage more accuracy on both ends."

Adam Neumann, co-founder and former CEO of WeWork, wants to buy the bankrupt company, The New York Times’ DealBook reports . Neumann is reportedly in talks with Third Point’s Dan Loeb to finance the deal through his new venture Flow Global Holdings. Neumann was ousted by the WeWork board back in 2019, and the co-working company, once worth upward of $47 billion, has struggled in recent years amid the shift to remote work. In a statement , WeWork called itself “an extraordinary company. As such, we receive expressions of interest from external parties on a regular basis. We and our advisors always review those approaches with a view to acting in the best interests of the company.”

No. 2

Bank of America trails just behind Hewlett Packard Enterprise atop the 2024 Just 100 list. The annual poll ranks U.S. public companies by the most important in showing that the stock market is “doing right by all stakeholders,” CNBC reports . The Just 100’s 236 data points take into account workers, communities, shareholders, customers and the environment. Other financial institutions that made the list include Citi (No. 5), American Express (11), Truist (14), JPMorgan (16), BNY Mellon (21), PayPal (26), Mastercard (28), Fifth Third (45), Synchrony Financial (48), PNC (54), Huntington Bank (59), Capital One (63), Comerica (87), Ally Financial (90) and BlackRock (96).

Let’s travel back to 1873, shall we? President Ulysses S. Grant signed into law the Coinage Act on Feb. 12 of that year. To call the decision a controversy is an understatement. The Crime of 1873, as it was called, was when the U.S. dropped silver dollars from official coinage, rendering the coins essentially worthless. The country was paving the way for the gold standard, which Investopedia calls a “monetary regime under which the government’s currency is fixed and may be freely converted into gold.” The first Coinage Act, in 1792, established the U.S. Mint and made the dollar the official legal tender of the U.S.

Reminder that I’ve launched a new column called Finance Chief Fridays. This past week, Macy’s Adrian Mitchell joined me to discuss how retail has changed since the days of Blockbuster and to share advice for those aspiring to be a CFO. Here’s a snippet of our conversation:

???Since finding your passion for retail, what’s kept you in that industry?

When I started my career in retail in 2001, digital was not really a thing. This is way back when Blockbuster was still around. You fast forward to today, it’s so much more sophisticated, and that really keeps me energized. There are new challenges, new problems to solve. It’s an industry where, if you are not on top of your game, there are consequences — to see companies in retail that have gone bankrupt over the last 15 to 20 years. But there’s incredible reward by continuing to innovate.

To read the full interview, check it out here .

For Black History Month, The Finance Files wants to recognize trailblazers in our industry.

Who is a Black leader in finance you admire and why?

Join the conversation in the comments below or post your response using #BlackHistoryMonth2024.

Stay tuned for the next edition of The Finance Files, a newsletter from LinkedIn News. What stories, trends or conversations have recently stood out to you in finance and the economy? Comment below.

Lastly, we’ve launched Finance Chief Fridays . Check it out, and feel free to send me your ideas for CFOs you’d like to see interviewed.