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Roula Khalaf, Editor of the FT, selects her favorite stories for this weekly newsletter.
The author is the former global head of equity capital markets at Bank of America and is now a managing director at Seda Experts.
On a television show Seinfeldthe Costanza family it celebrates an end-of-the-year global holiday called Festivus, featuring unusual rituals such as the “Airing of Grievances” and “Feats of Strength”.
For investment bankers, their value comes in mid-January to mid-February, when they are told their total returns for the previous year.
When I started in banking in the mid-nineties, “comp day” rivaled any holiday in drama and intensity. Doors slammed, grown men (usually men) fought back tears, and impromptu champagne celebrations erupted in nearby bars. The whole floor was torn apart by raw emotion.
Today comp day is celebrated with every visit to the post office. Today's banker is summoned to the manager's office by an emailed calendar invitation. The manager, armed with a spreadsheet and HR-vetted talking points, delivers the news and monotony by Ben Stein economics teacher at Ferris Bueller Day is closed.
The script follows a precise formula. First comes the total return figure, followed by how it compares in percentage terms to the previous year. The manager then splits the bonus (or “variable compensation” in legal terms) into its components: an immediate cash dividend and cash paid out in restricted stock. The vesting schedule of stock awards is detailed – what shares are available over the years. The manager also announces the base salary for the coming year.
The meeting ends with an unusual blessing – ranging from a figurative speech in the head about “understanding your contribution” to a gentle advice about “areas of development”.
The home run at the event can be attributed to a variety of factors, not least the post-financial crisis regulatory reforms that turned bank bonuses into slow returns. High base salaries and startups “role-based benefits” Europe (around the EU bonus cap) means the bonus isn't the make-or-break moment it used to be. Intense public scrutiny of the bank's returns also forced some form of moderation.
Moreover, elements of doubt and surprise have been largely eliminated. As January rolls on, performance review reviews give a hint of the outcome, rumors of year-to-year computer changes swirl, and reward more than senior management's efforts to contain. Team leaders, meanwhile, manage expectations.
Of course, banks still influence, scheme and grovel before the day of sale, by legally filling out online tests and increasing their efficiency. With large, cross-departmental teams dealing with contracts, the amount of revenue is often highly dependent, making it easy to claim credit for untouched work.
But they are very simple things. Later that day, one of his senior colleagues famously put the leadership on a 10-page PowerPoint, including a league table of only “his” contracts to show how badly off the bank would be without him. As the story spread, there was a mixture of laughter, disbelief and bitter respect for the bile. I doubt many today would have the chutzpah to pull off such a fight.
Even the answers are now clean. Today's bankers know any public display—joy or anger—can be used against them. Land a big bonus? Show yourself moderate disappointment; you don't want the honchos to reconsider their generosity next year. Are you strong? Give a stoic nod and quietly ask for the next conversation. The dramatic explosions of time are (mostly) leftovers, as old as Gordon Gekko's. Motorola phone brick. When I led groups, no direct statement ever raised its voice or betrayed more than a hint of anger, even when their “number” sank.
Bankers know they are lucky, they earn more than 99 percent of the population. But their sense of entitlement isn't about absolutes – it's about comparisons. Nothing stings like the realization that a peer is going home more. When their comp is not equal, i relative Complaint turns into vague bitterness.
Sometimes, you hear about a salesperson somewhere who loses his temper after receiving a “donut” (industry slang for zero) or a low bonus. This rare eruption only serves to emphasize how far we have drifted into the past storm and pressure.
These changes reflect a broader shift in investment banking, where the trading culture of the past decades has given way to something more regulated and more conscious of visibility and compliance. The annual bonus event has become another carefully managed event, its rough edges smoothed out by the process, changing office customs and decorating the facility.
So when you get your “number”, don't slam the door on your way out — that's against workplace etiquette, and your employer may have grounds to repossess your unclaimed stock!