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DLJ Tightens its Golden Handcuffs

by erica copulsky

To stem the tide of defections that have been plaguing the firm, Donaldson, Lufkin & Jenrette is planning to make lucrative pay guarantees throughout its investment bank's rank and file, according to sources inside and outside the firm. DLJ is setting aside a pool of $40 million to fund the initiative, these sources said.

The firm intends to unveil the plan to employees on Monday, after its managing directors return from an annual off-site conference set to begin last night. Sources said details regarding the plan will be ironed out at the conference.

However, news of the proposed stay-put contracts, which was leaked to senior executives earlier this week and then passed on to their staffers, hasb DLJ associates and vice presidents buzzing through the halls. According to those familiar with the plan, DLJ will offer its associates, VPs and senior VPs guaranteed pay packages for two years if those employees sign a non-compete contract with the firm.

While details of the terms of the contract could not be determined, firm insiders said the offers would be a significant percentage above an individual's current pay. Those figures vary since bankers, particularly at the VP level and above, are paid based on their performance. Meanwhile,sources continued to speculate on the amounnoop One person close to DLJ was told that associates, for example, who currently earn $250,000 a year, would receive guaranteed pay packages ranging from $400,000 to $450,000 each year for the next two years. Another person was informed that first-year VPs would be guaranteed $1.2 million to $1.5 million over two years.

DLJ's move comes as the firm-like many of its Wall Street rivals-faces an unprecedented exodus of talent to dot-com startups, private equity firms and other entrepreneurial opportunities. Indeed, Goldman, Sachs & Co. on Wednesday said it would dole out two million of its shares to its junior executives in order to discourage them from hopping to dot-coms.

At DLJ, insiders and others close to the firm say it has lost at least 25 associates and VPs so far this year. And they fret that their recruiting efforts will be hurt by the publication this week of a new book entitled "Monkey Business'' which chronicles the less-than-glamorous life of investment banking associates. The book's authors, John Rolfe and Peter Troob, worked at DLJ. Among the bankers who have recently left DLJ are Steven Ketchum, who went noop executive officer, and David Blatte, who went to venture capital firm Catterton Partners. Tim White and Keith Palumbo headed for the Audax Group, a private equity firm. DLJ is not the only firm taking measures to close the floodgates. In addition to Goldman's announcement yesterday, Morgan Stanley Dean Witter&Co., Lehman Brothers Inc., Bear, Stearns & Co. Inc. and Thomas Weisel Partners are either launching or plan to launch merchant banking funds that allow employees to invest their own money, side by side, with that of their firms.

DLJ has long been offering employees at the junior officer levels and higherthe chance to participate in the firm's lucrative funds,which matchemployees' capital four-to-one. DLJ has become virtually synonymous with the wealth-creating vehicle, which also has served as a handy retention tool to prevent bankers from jumping to competitors. However, it appears that even the co-investment plan hasn't been appealing enough to counteract the magnetic pull of private equity and other entrepreneurial opportunities, which offer the potential to cash out on a windfall from stock and options.

And while the proposed guarantees are supposed to be the firm's latest panacea, insiders say that they may end up being a major point of contention instead.

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