A greater portion of compensation is now fixed, compared to the past. Banks are deferring bonus payouts to discourage short-term risk taking. That has the effect of reducing compensation costs in the current year, but increases the payout in future years, reducing the flexibility to tinker significantly with compensation costs.
Universal banks including JPMorgan Chase (JPM) and Citigroup (C) have nevertheless made efforts to trim salaries for capital markets employees. Compensation declined 36% in 2010 at JPMorgan's investment banking division, with the average compensation per employee declining 8% to $341,551.
Citigroup does not breakout its "securities and banking" compensation costs but the bank is laying off nearly 5,000 workers, 25% of which is in the investment banking business.
At Goldman's smaller rival Morgan Stanley, plans are underway to lay off 1600 employees by the first quarter of 2012. Because of its substantial wealth management operation, Morgan has a slightly different compensation structure relative to investment banking peers, with compensation often taking up as much as 50% of revenues.The investment bank may cap cash bonuses for senior management for 2011 at $125,000 and defer as much as 75% of their compensation, up from about 65% in recent years, according to a Wall Street Journal
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