Bankers watched the value of their nest eggs gyrate along with stock values last week.
Because an increasing portion of total compensation is now tied to stock options-which give the holder the right to buy shares in the future at an agreed-upon price-sharp downward moves in share prices hit some bankers in the wallet.
"One executive told me that he told his wife not to shop today because 'we are a little poorer,'" said Rose Marie Orens, a compensation consultant with KPMG Peat Marwick in New York.
The executive was only half-serious. While some executives may be watching the ticker tape with a sense of dread, it appears that most are having a tough time working up a sweat over the market's gyrations.
Executives and consultants interviewed were more philosophical than fearful about the past week.
They contend that an occasional 7% one-day drop in the market-while dramatic-is the price that a generation of executives must pay for the unparalleled run-up of the past 15 years.
Since most stock options granted by companies have 10-year terms, the average holder is in a position to ride out a temporary dip.
"Most of our executives look at this for the long term, and we have had a good run-up in the last few years," said Vernon Hill, chief executive officer of Commerce Bancorp, Cherry Hill, N.J. "In the last 12 months alone, our stock has been up 60%."
He added that Oct. 27, the day the market dropped 554 points, found most of his top-level employees more amused than frightened.
"We all went home to watch it on TV," Mr. Hill said. "It's like sports now. Many saw the drop as a buying opportunity."
Paula Roe, a Norwest Corp. senior vice president who oversees the Minneapolis banking company's compensation program, said a sustained downturn in stock prices might lead to "stomach acid" among the 50,000 full- and part-time Norwest employees who hold stock options.
But Norwest's stock regained last Tuesday almost all it had lost the previous day, and there was little concern at the company.
"Employees understand that there will be some movement with the stock," she said.
Several compensation experts contend that there may be a generational gulf in the way options are used by people in the financial services industry.
"I do see a lot of splurging on luxury items by young people, particularly in the securities industry," said Charles King, a compensation expert at William M. Mercer Inc.
"But I don't see as much of that among older executives," he said. "They are interested in building long-term appreciation of capital."
While executives are somewhat detached about the market's volatility, compensation experts said that could change if the market began a dive that lasted for a sustained period.
Indeed, a bear market could lead to a reexamination of the heavy use of stock options as a form of compensation, said Diane Lerner, a compensation consultant at Watson Wyatt Worldwide.
"Each year, more and more companies shift compensation into stock, and it has paid off until now," she said. But a big correction would raise the issue: "Would you be able to retain people and motivate people if the tables turn?"
