Paying retention bonuses greater than employee production with taxpayer money.
Brokers at Morgan Stanley and Citigroup’s Smith Barney unit who produce at least $1.75 million of revenue may be eligible for a payment equal to 105 percent of their annual production, according to a person familiar with the plan.
About 6,500 of the combined entity’s 20,000 brokers are expected to be eligible for the retention package, with the first payment in January 2010 and the second in 2012, the person said. Overall retention bonuses could total $2 billion to $3 billion, the person said.
First of all… I know brokers are a rather odd employee class. Ie, they don’t use traditional non-compete agreements and other things like most employees are exposed to. In fact if a broker switches from one employer to another, most get to freely take their clients with them!!!! Imagine the mess if that occurred in the technology realm. Work for Intel, and then go to work for AMD, and take the IP with you with no consequences…. It would not fly, but Wall Street is different.
Granted, $MS and $C are a business, they can do what they want, and maybe these somewhat oddball employee practices have value… but as soon as they take taxpayer money, now I have a real interest, and will fuss about it.
So, onto retention bonuses… I take it no one can do basic math anymore.
6500 employees eligible
As it reads, to be eligible you must produce at least $1.75 million
The bonuses are 105% of their production, or $1.8275 million, assuming all eligible employees only produce the minimum of $1.75 million each
for a total of $11.944 billion
So how on earth does this total $2-$3 billion!!!! who ate the other $8.944 billion
With this kind of accounting, no wonder Wall Street is in trouble.
In all seriousness, my guess is either the spokesman or the reporter didn’t quite get all the facts straight. Its likely out of the 6500 broker eligibility pool, only small percentage fall into the $1.75 million or more productivity realm. At least that’s what I hope the case is.
Either way… who are they going to go work for? Why pay to retain them at all at this point? Its not like they will take their client base and go to work in Antarctica or something. And if they did, and can make that kind of money starting a new firm from scratch, by all means they should do so. Remember if one renounces citizenship, they really get hammered tax wise, thus tax payers would get their due anyhow.