Overview:
The following survey
identifies ranges of total compensation awarded to revenue producing
professionals with a focus on investment banking, private equity and venture
capital. CPI began this study in 1996
and continues to update it as information becomes available. Total compensation includes signing bonus,
base salary, bonus, equity, profit sharing, stock options, base, bonus, equity
and stock and benefits.
This
research/survey takes into consideration the top ‘bulge bracket’ firms and also
covers various CPI small to middle market institutional clients. The range is considerable, but there are
situations with top firms (angel stage companies as an example), where cash is
significantly lower, which have to be included in this survey.
Please
note that the top of the range includes individuals who have performed at the
highest level at investment banks such as DLJ, Goldman, Sachs, Lazard Freres,
Merrill Lynch and Morgan Stanley.
|
Position |
Low |
High |
|
1st
Year Analyst |
$60,000 |
$90,000 |
|
2nd
Year Analyst |
$70,000 |
$110,000 |
|
3rd
Year Analyst |
$110,000 |
$175,000 |
|
1st
Year Associate |
$170,000 |
$250,000 |
|
2nd
Year Associate |
$280,000 |
$385,000 |
|
3rd
Year Associate |
$295,000 |
$565,000 |
|
4th
Year Associate |
$350,000 |
$670,000 |
|
Vice
President |
$390,000 |
$1,500,000 |
|
SVP,
Director, Principal |
$550,000 |
$2,000,000 |
|
Managing
Director |
$785,000 |
$7,000,000 |
|
Department
Head |
$2,000,000 |
$65,000,000 |
|
Pepsico’s Chairman and
Chief Executive, Roger A. Enrico, waived his 1998 $900,000 Annual salary to help
fund scholarships for the children of PepsiCo’s front line employees. |
|
Position |
Base |
Bonus |
Other |
|
1st
Year Analyst |
$35,000-$40,000 |
$25,000-$50,000 |
$6,000--$10,000 signing bonus. The high-end of base is $40,000 at the Morgan Stanley’s, DLJs,
etc. and will increase next year at all levels. |
|
2nd
Year Analyst |
$40,000-$45,000 |
$30,000-$65,000 |
It is rare for an Analyst to resign before the 2 year program
expires. Analysts are ranked by a 5
point system (5 the best), a review and/or bonus. |
|
3rd
Year Analyst |
$50,000-$75,000 |
$60,000-$100,000 |
Some firms can pay bonuses to its 3rd Year
Analysts on a monthly basis.
Individuals at this level can obtain carry/equity for more
entrepreneurial opportunities. |
|
1st
Year Associate |
$75,000-$110,000 |
$95,000-$190,000 |
$10,000-$40,000 Signing Bonus. $5,000-$10,000 relocation allowance. Equity typically
becomes available to individuals at this level. Co-invest opportunities are being offered
as high as a 10-1 multiple. |
|
2nd
Year Associate |
$75,000-$135,000 |
$220,000-$250,000 |
A portion of compensation starts to be awarded in the form of
stock at the 1st year Associate level. |
|
3rd
Year Associate |
$90,000-$165,000 |
$180,000-$400,000 |
Because of the .com phenomenon, this is when individuals
start to really view the grass as greener. |
|
4th
Year Associate |
$95,000-$120,000 |
$255,000-$550,000 |
Bonus in stock ranges from 5% to 20% at a 20%-30% discount to
market value. |
Compensation continues to
increase as the private equity/venture capital market has become increasingly
saturated and competitive. Base salary
and bonuses have increased by at least 20% from 1998, which was also up from
1997, and will most likely increase for the full year 2000. The top investment banks are becoming more
creative in their compensation methods in order to retina the best talent. Investment bankers from firms such as DLJ
are allowed to co-invest in merchant banking deals as early as their first year
out of post business school at a ratio as high as 10-1. New funds are giving carry and sometimes
equity away to Analysts. On campus,
firms are using high pressure tactics to lure candidates from traditional
employers.
In order to compete for
the best talent, firms are either `paying-up’, or not getting the talent they desire. There is no way around this.
In order to analyze
investment banking opportunities versus private equity, a top investment bank
recently traveled to one of the lading MBA programs in the US to make a
presentation for its investment banking group.
Out of a class of over 340 people, seven attended the presentation. At another top MBA program, five
attended. As recently as three years
ago the number probably would have been closer to 200. There have been articles in just about every
serious financial publication describing this phenomenon. As an example, please refer to The New York Times article dated
December 14, 1999: Market Place: “Wall Street is flush with Cash”, which
describes recent compensation trends.
The herd is following
private equity/venture capital and the .com opportunities because they offer
everything a candidate desires: a more relaxed culture, advancement based on
meritocracy, excellent cash compensation, ownership, better work hours,
spiritual fulfillment, and the sense that one is not missing an economic
revolution (similar to the gold rush of 1849).
Banking, conversely, can represent thankless work, bureaucracy, a
difficult fee structure, responding to clients twenty-four hours a day, and
most importantly, a front row seat to those (usually younger) making millions
of dollars in the .com space. All one
has to do is watch television to desire what they do not have, ownership in a
successful .com.