As The Wall Street Journal points out, firms like Barclays Capital, Goldman Sachs, JPMorgan and Morgan Stanley have seen their commodities trading income hit new (or near) record highs this year - at a time when clearly revenue growth generally has proved difficult. Top currency traders are also thought to have brought home the bacon this year. Now, clearly we are in the middle of a 'banker bonus backlash', with governments anxious to ensure that payouts are significantly cut back following the so-called bank 'bailouts', but should we really expect firms to risk losing star traders (and necessary revenues) just because of political expediency ?
The firms argue that, in order to protect revenue growth and profits, they need to pay top dollar to these key staff, or they will simply quit. Governments say that this is nonsense, as there is currently nowhere for these traders to go. But that, of course, is a nonsense. Sure, the bidding war for talent is not as intense as it once was, but individuals with proven track records will always find a home - even in these markets. And although hedge funds are failing in their hundreds, there are still some very large players out there who would jump at the chance to nab some of these traders away.
The reality, therefore, is that top traders will still get paid out again this year-end, reducing further the bonus funds available to the rest of the staff.
1. 'If it wasn't for these traders, there wouldn't be no bonus pot at all. Why shouldn't they get paid out ?'
2. 'The industry as a whole needs to revisit compensations structures so that individuals are rewarded for consistently good performance over a multi-year time horizon'.
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