If you have managed to keep your job as an investment banker, you are probably being overpaid. Even as mergers and IPOs slowly pick up, pay ratios at investment banks remain elevated. Bonuses are supposed to fluctuate with market conditions. Instead, they are sticky: firms do not want to lose good talent and often also need to pay guaranteed dollars to bring in new blood before the upturn.
Executives have said they are prioritising hiring bankers, suggesting to Wall Street that when deal activity rebounds there will be enough business to push down the remuneration ratio to more reasonable levels. Goldman Sachs, for example, in the blowout year of 2021, recorded an efficiency ratio of just 54 per cent even when gross pay was at juicy levels. But the tension between shareholders and employees is tricky to reconcile. Shareholders want to put a lid on pay to focus on profit margins.