JPMorgan Chase & Co.'s investment bankers will begin getting more of their pay in salary next year and less in bonuses as the company shifts the weighting to remain competitive with rivals, a person familiar with the company said.
The plan, unveiled last week at a meeting with investment bank co-heads Steven Black and William Winters, affects those who earn half or more of their total compensation in yearend bonuses, the person said, declining to be identified because pay matters are confidential. It will be implemented in 2010, after details are announced at the end of this year. The bankers' total pay will not change because bonuses will be lowered.
JPMorgan Chase is seeking to keep pace with rivals that boosted salaries amid restrictions on bonuses and make its compensation costs more predictable. Citigroup Inc., Morgan Stanley and UBS AG have increased salaries for some employees. Citigroup will raise base pay as much as 50%. Morgan Stanley said in May it will increase base pay for some executives, while UBS increased banker salaries by half.
"A number of firms have increased salaries this year, and there is likely to be as big a number doing it next year," said Alan Johnson, managing director of Johnson Associates Inc., a Manhattan pay consultancy. "Most of the major financial firms have suppressed base salaries for the last 10 years, so they were unduly low compared to where they were 15 years ago."
About half of JPMorgan Chase's 25,783 investment banking employees will be eligible to receive more of their pay in salary, the person said. All employees will be eligible for a merit-based raise for 2010. Kristin Lemkau, a JPMorgan Chase spokeswoman, confirmed the pay discussions took place at the meeting.
The company's investment bank is having a record year, with revenue in the first half of $15.7 billion. In the first six months of 2009, the unit set aside $6.01 billion for employees' compensation, equal to 38% of revenue in the period.
Goldman Sachs Group Inc. allocated $11.4 billion, or 49% of revenue, and Morgan Stanley put aside $5.91 billion, or 71% of the half-year revenue, for employee salaries, bonuses and benefits. All three firms have returned government capital, removing them from restrictions on how they pay their workers. Citigroup has yet to repay any of the $45 billion in government funds it received.