Archive for the ‘The Ninja’ Category

Bonuses

April 9, 2010

People misunderstand bonuses. They resent them, too, but there again I resent Ant and Dec, I don’t think they should be banned (although perhaps taxed out of existence?)

I think the best way to tackle this subject is with some numbers, since facts always seem to be a bit lacking in the bonus debate. My salary is just under £75,000 per year. As long as I stay employed I can count on that, and that is the number I would be appraised on for credit-worthiness and so on. It is, I think, very high and is almost £30,000 higher than the average London salary for someone of my age and qualifications. I am always flabbergasted when I see it written down. I have never really overcome my childhood sense of money, when £1,000 seemed unimaginable. Given that when I grew up my parents were poor, money has become something which is both special and yet strangely unreal. Money, most of all, means freedom from worry.

One of the bizarre ironies of the credit crunch is that my salary was a lot less a year ago. Yup, you got it, banking is one of the few (perhaps only) industry to increase salaries in the face of the global downturn. There are a number of reasons for this.

First, some banks have been trying to take advantage of the situation and have been hiring aggressively. Barclays Capital and Nomura are the most commonly mentioned names here, but there are others. Meanwhile, organisations such as RBS and UBS have been desperately been trying to keep hold of their staff.

This has forced those organisations on the defence to increase salaries in order to keep people, and those who are poaching to offer above-market salaries. This doesn’t just apply to the superstars, but to everyone. Need a good replacement for that person who has just departed from your team? Try RBS. In turn, those organisations that are losing people will probably do a salary review and decide they need to increase salaries across the board. Those that have been poaching people will need to do the same thing – it’s not good to poach someone and then have them paid more than their peers.

Second, banks have pre-empted bonus taxes by increasing base salary. The idea is they will pay less bonus but keep people’s total compensation at the same level. So bonus taxes may well decrease bonuses, but they do cause wage inflation.

Combined, some people have done very nicely from the credit crunch; and in the light of honesty I have to number myself amongst them. Others, though, have lost their jobs (employment within the industry is still much lower) or been largely unaffected, so the love has not been shared as equally as some may indicate.

Finally, people have grown much more wary of stock options (typically forming a large portion of the bonus) since stock options in Bear Stearns and Lehman turned to dust.

On top of that base salary, my employer may choose to pay me a bonus. While no doubt I am extremely loveable, this is not a present. Nor is it a performance bonus in the traditional sense, i.e. something which is correlated to pre-agreed targets. If I do well, my department does well, my division does well and the entire business does well, then the bonus will be at its maximum. However, the employer also has a certain amount of discretion: they may not pay a bonus at all if the organisation needs to conserve cash, or they may prefer one person if their individual performance demands it, or if it is felt they may leave. There is no strict formula. Plus, the firm pays by accumulating a bonus pot over the course of the year (i.e. stashing away money from their revenue), so the pot is shared – one person gets more, then logically another gets less. Typically a zero (a donut) is a polite indication that you are no longer welcome and should consider employment elsewhere, unless the firm is doing badly, in which case everyone gets a zero.

My bonus is in the 20% to 30% of my base salary. For senior people, their bonuses will be many times their base salary.

Base+bonus = total compensation. Banks never speak in terms of the two separately. Nor does the taxman. An increase in base may even mean a decrease in bonus in order to prevent the total compensation increasing too sharply.

Put it this way: bonuses allow my employer to cut my salary. One year I may be paid one amount, the next that could be cut dramatically, the year after it may increase dramatically. The more senior the individual, the greater the proportion of their salary is in the form of a bonus, which in turn means more flexibility an employer has to trim their compensation down to the minimum.

Amongst junior employees (i.e. the vast majority) bonuses are typically viewed with some mistrust. Not that people turn them down, but no mortgage lender or credit rating agency looks at your bonus. Plus, banks will avoid increasing base salary unless they’re forced to and prefer to give salary increases within the bonus – typically so they have the option of taking it away again next year. Anyone who is smart stashes their bonus away until they have saved enough to live without a job for a few months … redundancy is a pretty sure thing in this industry. My own base salary once stayed fixed for three years in a row, although my bonus suggested very real pay rises. The fourth year my employer did badly and I got zero bonus, and the fifth, so after five years of employment I was essentially on a graduate’s salary.

This explains why RBS was so defensive of handing out bonuses to its over-performing investment bank division. To hand out a zero was both an open invitation to leave, but also would have been seen by its employees as a salary cut.

I would never argue that bankers are worth what they are paid (“worth” is such a difficult term to pin down), in the same way I wouldn’t argue about footballers’ salaries. What I would say is that the bonus is part of an unspoken deal: when times are bad we take pay cuts, when times are good then pay increases compensate for the flexibility and the previous down times. It is, in effect, an open agreement to accept unilateral compensation cuts. Perhaps we need a union?

On the other hand, perhaps it just further reflects the risk-and-reward culture of the city?

Wet and windy weather …

March 21, 2010

… with girls around the coast.

Why are girls gathering around the coast? I don’t understand.

Oh, I see. Gales. An accent. Meh.

Longevity forever

February 23, 2010

» Long live longevity

Back in the heady days of 2006, some experts were predicting that London would become the centre of a huge new global market in trading the “longevity risk” faced by pension funds. It could eventually outstrip the huge credit derivatives market, they said.

Investment banks got very excited about it. But nothing much happened. In recent months, however, there have been a number of big longevity insurance deals that could change things.

Yesterday, BMW’s UK arm revealed it had bought insurance from Deutsche Bank’s Abbey Life that will protect it against the risk that the 60,000 members of its pension scheme live longer than expected.

Hmmmmm, I foresee a financial product called a longevity swap.

This is how financial engineering starts: a specific requirement which gets resold and resold and resold. What is more depressing is that most people will think of these securities as “complex financial engineering”, an almost wilful misunderstanding of them. Yet just today I was watching a very nice advertisement hosted by that very nice Michael Parkinson about some very nice life assurance product (I was ill, if anyone was wondering what I was doing) where people paid a very nice regular amount per month and, after two years of paying, were assured a very nice life assurance payment on their death.

Insurance is all about risk, and so are the financial markets – measuring it, controlling it, charging for it. And generally, for a purpose (admittedly a purpose which can later by absorbed by the larger world of speculation). Financial products such as derivatives and swaps did not come into life for no apparent reason. It’s a point I always feel is underplayed: these fancy financial products are useful to someone.

The hours

February 12, 2010

“The Hours” was a charming little film about Virgina Woolf, a dramatisation of a (in my opinion) less charming book. That is not what I am talking about.

Banks tend to invest a lot in individual employees (or, if you prefer, give them disgusting perks and pay, flying in the face of common sense and public opinion and assuredly ushering-in the end of civilisation as we know it), but with it, many would assume, comes some nasty hours. There is an element of truth to this: European markets open at 8am, so getting in between 7am and 8am is sensible. Ending work at 6pm means a bare minimum 50 hour week, with 55 hours seeming more likely. For the past week my working day has got to a rather silly 13hrs, which would make a 65 hour week (assuming 8 hrs of sleep, that’s a rather depressing 87.5% of time spent in the office).

There is a temptation to see this in a “long hours for big rewards” sense, but I doubt it is that simple. It’s not as if we’re paid by the hour.

Nor is it about being a young person’s game: I am the oldest in my team and the others were out of the door at 6pm on the dot (albeit, this could be about them having a life and me being a sad, old git).

So what is it about?

Christ, if only I knew then I could isolate it, find it somewhere else and leave everything else behind.

I strongly suspect it’s about a job well done. But that is nowhere near evil enough. So perhaps its about my plans to take over the world (possibly starting with Belgium).

Former BP boss Lord Browne admits sexuality fears

February 8, 2010

» Former BP boss Lord Browne admits sexuality fears

Lord Browne did not reveal that he was gay until the end of his 40-year career at the oil giant.

A correction: he was forced to admit it when he was allegedly blackmailed about it, and then committed perjury.

Lord Browne said there was “a fear that was engendered in people’s hearts about being gay”.

“In corporate life it wasn’t something you talked about, and in the oil industry is was not something you did,” he said.

I do. But there again, I’m not running a FTSE-100 company and he was so perhaps I should focus on acting macho. Hmmm, whining for most of the afternoon that a good man is hard to find was not, perhaps, the best way to start my new straight image.

I may be a banker, but HE’S a journalist

February 5, 2010

I am a banker; I am scum. This is a given.I have accepted it. I am no longer in the closet. Others, though, remain there.

Two interesting examples of interactions with journalists (financial journalists, I have yet to come to the attention of the tabloid press) that our corporate communications department had …

“So, rumour has it you’re going to buy bank ‘X’.”
“We do not comment on this kind of market rumour.”
“So that’s a ‘yes’.”
“No, it’s a reflection of the fact that we don’t comment on this kind of market rumour.”
“So that’s definitely a yes. We’re going to print it.”
“Errrr …”
“Byeee.”
“Look, you really shouldn’t print it.”
“That’s definitely a yes.”
“You shouldn’t print it because it’s completely, utterly, unambiguously false. You’ll harm your reputation, our share price, artificially inflate the price of the stock, mislead the market and generally cause nothing but harm.”
“But I’ve written it now.”

And …

“So, we’re releasing this new product.”
“Sounds good.”
“Planning the press release next week.”
“I’m out next week.”
“Ri-i-i-i-ight. So could someone else write it?”
“No.”
“Would you feel comfortable with us giving the story to another newspaper?”
“No. I’ll write a very negative story when I’m back.”
“So, we’ll delay the go-live.”

I do not think anyone actually thinks journalists are nice people, but I suspect most people think they tell the truth. Well they do. If it’s useful. Otherwise they, errr, fill in the gaps. Truth is so last century. Even this, I suspect, is not a surprise to most people.

What is surprising is how riled we do get about what the press reports. Given that significant proportions of it are untruth, manipulation, distortion or taken out-of-context it does surprise me that we bother.

The blood-sucking vampire squid

January 22, 2010

… or Goldman Sachs, as they are more affectionately known (surely being blood-sucking and a vampire is a bit of a truism?). The alternative moniker came from Rolling Stone magazine, not a publication widely noted for insight into financial affairs, but that’s just being picky. Some may consider it a slander on vampire squids.

So is this awe (and disgust) shared by those within the industry? After all, relationships in this industry are a bit like those in a soap: constantly changing, complicated and sometimes stretching credulity.

Well, no. But is this surprising? They’re not like MI5 or the Mafia: you are actually allowed to leave once you enter. And when they leave, they join competing firms … and vice-versa. Do these ex-Goldmanites have an aura (the mystical kind, not the strange sensation that pre-empts an epileptic fit)? A strange other-worldly knowingness which can be applied to financial markets with profitable consequences? Tentacles? Well, no. I’ve found them disappointingly dim and, more irritating, lacking in subtlety (shouting at people seems to be their only method of managing people). When I speak to them as competitors / clients / cooperator is there a bit of a lisp from their vampiric canines? Well, no.

I once went for an interview there (the following may contain elements of fabrication mixed with elements of truth, such as the fact people were speaking):

“Ninja, you’ve come across well in all the interviews, but I just get the impression you want a job. You should want to work for Goldman.”
“That seems reasonable. You are just another investment bank.”
“But we’re Goldman.”
“Indeed. My life would be an unhappy one if my only wish in life was to work for yourself, as currently I do not.”
“But we’re Goldman.”

Needless to say, I didn’t get the job. You can dismiss the rest of this blog as sour grapes, but some things are undeniable: they’ve made loads of money and they are perennially successful. So if it’s not their people, perhaps it’s their culture? And on that subject, there are three commonly raised “facts”:

  • They subject people to hundreds (well, maybe not hundreds, but more than average number) of interviews before hiring them;
  • They have a “dead wood” policy of trimming a certain number of people every year, i.e. making it easy to get rid of poor performers;
  • They’re a giant hedge fund with a bit of customer business attached to the side.

I’ve never really bought the first item as a good thing, if true. In fact it makes them sound as if they have Alzheimer’s. The second one, though, does make me wonder. Firing someone is a difficult thing to do, aside from the purely humane there’s the problem of being without a member of staff for several months, the bad morale and the possibility you may not be allowed to hire a replacement.  The idea of having it built into the culture would overcome a lot of these advantages and would make it a lot easier to get rid of poor performers. It is, though, ruthless, unhelpful, morally ambiguous, and quite possibly not true, as well as being far from certain to succeed: a climate of fear has its downsides, although, I suppose, if you’re supremely self-confident then you will think it will never happen to you.

As for the final “fact”: I am not convinced. When I bump into Goldman as a competitor their actions seem to be more than just a sham … or, at least, a very good sham with made-up clients and everything, and really this is heading towards paranoia.

There is one other possibility: luck. Are Goldman just lucky? I doubt it’s that simple. Will they continue to be “lucky”. Perhaps. But now their reputation as the investment bank is coming back to haunt them, perhaps it’s not the kind of luck they’re after.

Sorry is the hardest word to say (at least, meaningfully)

January 15, 2010

I am, apparently, overpaid. My employer does not think so, I am less certain, the public is really rabidly, absolutely, 100% doubt-free need-no-truth-drug call-me-a-liar-if-an-atom-of-doubt-crosses-my-mind certain. This is odd, because they do not know me and most people find my job difficult to describe. However, their basic assumption that I am not saving the world is safe, so this is hardly a Batman-esque public anger at the anti-hero ironic situation; other assumptions that I am as evil as a James Bond super-villain probably need further scrutiny in the court of public opinion.

It has been a tough week to be a banker. Well, no. It’s been a tough week to be a solider, or a Haitian, but bankers? I appreciate the public isn’t exactly in love with the banks (which is a shame because they used to be soooooo close) but it has been tough in the same way that the coffee shop running out of your favourite syrup has been tough. The investment banks are outraged but are not saying so for fear of being lynched (an unusually self-aware move): the world, strangely, did not tremble.

The rest of the script is supposed to work this way: I express remorse at mistakes made, look awkward on the subject of bonuses but insist they are necessary, try not to be too obnoxious and hope it all goes away.

Except I am not sorry. I did not take the government’s dollar. I am happy with the salary I am paid (although to be fair, I still have the mental age of a teenager so find being paid at all is a somewhat perplexing experience) and my employer is happy to pay it (as are others would-be employers). I did not create a housing bubble, encourage mortgage dealers to lend money they would never, ever get back. I did not gave credit ratings to unsound securities. I did not take out a mortgage I would never repay. I did not speculate on house prices (either by buying personally, or trading). I did not create regulators who are too proud to admit they do not understand the markets. I did not change how I viewed risk dependent upon my salary (or my bonus). I did not put my money in Icesave accounts. I spend some of my salary and when I do I try to benefit others. I pay tax. I try to do the right thing. I am not sorry.

Death by tutu

January 8, 2010

“It’s a very masculine world.” People say this to me when they learn that I’m gay and I work in an investment bank. There are a number of ways to be insulted by this:

  1. I may be gay but I’m still a man, I don’t flounce into work in floral prints and tutus (except, of course, on casual day when the tutu is virtually a uniform);
  2. last time I checked, the rest of the world was not a Utopia of mutual respect and gay rights, so I don’t think investment banking is any better or worse than most industries;
  3. since when did you base your opinion of a particularly industry on what you saw on television;
  4. masculine does not mean intolerent.

We have a gay network. It remains a gay network despite my determined attempts to turn it into a mafia, awarding promotions and favours to its most deserving members (i.e. me). This plan is hindered by a few pertinent facts:

  • None of the network/mafia are very important, so their ability to award favours – outside of a charming interior design advice – is very limited;
  • We are the worst gay stereotype and enormously bitchy (I can’t see any gay mafia lasting longer than a few days before an internal battle breaks out, marked by a vicious wave of assassinations, car-bombings and double-crossings, sparked by a suspected sleight over shoes);
  • The firm generally disapproves of a network called a mafia.

The chip-on-shoulder attitude of my fellow network members would be more understandable if they went through some genuine hardship. It’s not that the bank is remarkable forward looking – although it does seem to take the whole “people are our most important asset” thing a lot more seriously than it needs to – it’s just it doesn’t care. Or it does care: about the money.

I find it amazing to think of anyone as saying “don’t give that work to Ninja, he’s a shirt-lifter” because it’s missing the point: where’s the money? We all know how much banks care for money.

And that’s how I thought it was everywhere, except on a recent event run by a financial company (a consultancy) about general gayness (that was not the title, I hasten to add) they were remarkable frank about the whole “he’s a shirt-lifter so let’s not promote him” issue. These things make me angry, not because I’m a fierce defender of equality or my cause (is it really my cause?) but because there’s few things more annoying than genuine stupidity when it slaps you in the face.

“I was thinking about this project to maximise our revenue. Who do you think should run it?”
“It’s a tough call Mr Senior Director, but I have a suggestion.”
“Yes?”
“I was thinking of lowering our revenue, damaging our brand and product, putting the project at risk and making our management practices look questionable to our investors and clients.”
“You’re really selling it Mr Similarly Senior Director, what do we have to do?”
“Well the current plan is to give the project to Smith.”
“The one who wears the tutu?”
“That’s him. He’s a safe pair of hands, really knows his stuff and will deliver the project on time, under-budget and will maximise our bang-for-buck.”
“What do you suggest?”
“I was thinking of giving it to Jones.”
“Ah yes, the idiot responsible for Project Secret.”
“Yes, that’s the chap. You see, Smith is a shirt-lifter and I thought I’d let my own prejudices lead to spiralling costs and lack of delivery.”
“Good call, Mr Similarly Senior Director, let’s do it! We can’t have poofs maximising our profits.”
“I agree Mr Senior Director.” [Pause] “Was that a double entendre?”
“No.”
“Still disgusting though.”

The gay mafia do not agree (which is hardly surprising, as cordial agreement is not something which characterises our views). Perhaps it’s not the same in all organisations, or even in all parts of this organisation, but however hard-earned that chip-on-the-shoulder and Princess Diana eyeliner, they do not advance the cause. But then you can’t trust them with any work: they’re all a bunch of poofs.

That’s money honey

January 1, 2010

I didn’t even want to be a banker. Not that there’s a pin-striped press gang wandering the streets of London, forcing people into a life of international finance against their will, coshing people with a stock portfolio before leaving them, possibly brain-damaged, in a marble foyer with a blackberry and a Charles Tyrwhitt loyalty card.  It’s just I sort of drifted into it.

They were handing out free beer. I didn’t even know who they were – they weren’t in disguise, it’s just my interest in banking was limited to my student overdraft – and as a student a free anything, especially beer, was of interest. I gave them my CV, and, not thinking I was their type I thought it was a pretty reasonable deal. When I returned from two interviews in London, the second of which made me absolutely certain I was not their type, I forgot about the first interview and did a rather good impression of a sour grape, swearing I was never going to work there even if they paid me, which does seem to imply I had misunderstood the basic premise of a summer internship.

At the time my views were social democratic / liberal. I could just short-cut that awkward phrase and describe myself as a lefty, but like so many labels it keeps bad company: Arthur Scargill, Harriet Harman … Stalin. It’s like describing yourself as a euro-sceptic, which, let’s face it, however sceptical you are about the European Union, is also shorthand for “I’m a right-wing xenophobic nut-job who dislikes foreigners”.

I did the internship for the money. I was a student and I needed it. Then I went back the following summer. Then they offered me a full time job.

So perhaps it was the money after all, but I prefer to think it’s more complicated than that. I used to have a manager who said “money only demotivates people, I’ve never met a person whose performance was improved by the prospect of more money“, and I suspect he is right. When it comes to remuneration people either seem to feel that they have got the right level or not enough, and that other people have too much. I have yet to meet anyone who feels they are overpaid. Money is like freedom: it’s always good to have more and it’s awfully easy to take it for granted when you have it.

I stayed for the work. I get bored easily and every day people would bring me new, intriguing, fiendish puzzles to solve – which brings forth a strange mental image of someone dumping a stack of “Puzzler Monthly” on my desk every day.

“More puzzlers, boss?”
[Through a cigar poking from one corner of his mouth] “‘Fraid so, Ninja.”
“This just ain’t right, boss.”
“This is a bank, Ninja, not a holiday camp. I should have hauled you have the coals for that wordsearch you did yesterday, dammit man.”
“Sorry boss.”
“We’re all sorry, Ninja, but it don’t get the puzzles done.”

What I’m really trying to say is that I’m not greedy, that there’s reasons other than the money. Greed may be good, but it is a surprisingly shy character trait.