Over the years we have observed the rise and (more frequently) decline of many investment banks. As compensation is the key cost factor in the industry a sensible compensation structure is essential to achieving
long-term success in the business. So when we read that the centuries-old private bank of
Sal. Oppenheim had agreed to pay a former chief executive of
Arcandor the princely sum of 4 million Euro a year for being an advisor (and on top of it give him a three-year contract) we were not surprised that the company had to be sold to
Deutsche Bank. To throw around money like a drunken sailor can only end up with the business withering away due to lack of profitability. The situation at
Lehman Brothers (and the old
UBS before it was swallowed by
Swiss Bank Corporation) was not dissimilar. The level of compensation was completely out of whack and while it may not have been the deciding factor in the demise of these enterprises it certainly was
symptomatic for a general lack of good management and governance. Sensible recruiting is one - if not the - key factor in the success of a people business like investment banking - as well as in banking, securities brokerage and investment management.
No comments:
Post a Comment