The welcome hike in bankers’ salaries

By Felix Salmon
June 22, 2009

I don’t know whether bankers’ pay is really “soaring” or not, as the FT would have it. But this I think is a positive development, and doesn’t for a minute mean that pay is actually going up:

According to insiders and rivals, market salary rates for managing directors have jumped from about $250,000 (€180,000) only a few months ago, to closer to $400,000.

The point here, of course, is that base salary is finally become important again, after many years of being to all intents and purposes irrelevant. It got stuck at $250,000 at some point in the distant past, and never really rose from there — and in the context of managing directors who were pulling down seven- and even eight-figure packages, it was essentially an afterthought.

With a base salary of $400,000, bankers might start feeling that they’re actually getting paid to turn up to work every morning, and also that they’re being paid enough to be able to be asked to give up their bonuses should things fall apart again and their institution require a massive bailout. The concept of a bonus as something to be paid over and above a base salary, rather than as the only reason to turn up to work at all, will slowly start migrating out of Congress and popular culture and into the banks. And that’s a good thing.

On the other hand, there is the question of whether bonuses are going to be $150,000 smaller now than they were before, all things being equal. I suspect they won’t — and that once again, bank employees will take home more money at the expense of bank shareholders. ‘Twas ever thus.

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