CONTENTS

Executive summary

  • Leadership
  • Reward strategies
  • Strategic people management
  • Politics and regulation

 

Chapter 01  The business case for reform

  • The reward system in investment banking
    • Reform challenges
  • The business’s own interest
    • How to improve performance

 

Chapter 02  Organisational resilience and total reward

  • Overview
  • How much do banks spend on reward?
    • Reward and the psychological contract
      • Reward theories
      • Agency theory
      • Herzberg’s two-factor theory
    • Complexity of motivation and reward
  • Understanding the workforce: quantitative and qualitative analysis
    • Elements of human capital management
    • Quantitative vs qualitative analysis
  • Evidence base for organisational resilience
    • London Business School research
    • The Goldman Sachs example
    • Stanford University research
      • Controls and performance
      • Counter-cyclical hiring and employment security
      • Selective hiring
      • Self-direction and autonomy in teams
      • Comparatively high compensation contingent on organisational performance
      • Extensive training
      • Reduced status distinctions
      • Extensive sharing of financial and performance information
  • Moves away from an evidence-based approach
    • Casual benchmarking and imitation
  • Summary

Chapter 03  IIF Report: implications for human resources strategy and reward

  • Analysis of market events: the financial stress and its key features
    • Implications for reward and human resources strategy
  • Development of best-practice recommendations: current thinking and direction of efforts
    • Implications for reward and human resources strategy
  • Risk management
    • Risk management governance
      • Implications for reward and human resources strategy
    • Risk management issues
      • Implications for reward and human resources strategy
    • Stress testing
      • Implications for reward and human resources strategy
  • Incentives
    • Implications for reward and human resources strategy
  • Specific skills deficiencies
    • Implications for reward and human resources strategy

Chapter 04  Risk management

  • The race for market share
    • Over-emphasis on quantitative modelling
    • Statistical approaches to risk
    • Benefits of judgment

Chapter 05  Views from the market

  • Overview
  • Bank remuneration strategy survey findings
    • Compensation and benefits
    • Executives
    • Traders
    • Conclusion

Chapter 06  Latest ideas in reward and applicability to investment banks

By Peter Christie, Head of Reward, Hay Group

  • Learning from experience
  • Risk-adjusted performance measures: Accounting profit, economic profit and performance
    • Complexities of calculating economic profit
    • First mover disadvantage
    • The way forward
  • Non-monetary aspects of reward

Chapter 07  The shareholder’s perspective

  • Overview
  • Governance implications of the sub-prime crisis
    By Bimal Patel, Manager of Corporate Governance and Policy for RiskMetrics Group
    • Directors’ role
    • The impact of the crisis on executive pay packages

Chapter 08  The political perspective

  • Overview
  • The political risk of an unreformed reward and human resources strategy
    • Scale of risk
  • The political viewpoint
    By Vince Cable, Treasury Spokesman, Liberal Democratic Party, UK
    • The contribution of financial services
    • The extent and nature of the problem
    • The political response
    • Reform of the bonus system

Chapter 09  The search consultant’s perpective

By Paul Aldrich, Partner, CTPartners

  • Overview
  • The nature of the sector from a recruitment perspective
    • The importance of people
  • Front-office stars
    • Capturing the value of new hires
      • The growing importance of teamwork
  • The search for talent
    • The recruitment market
  • Compensation expectations
    • The annual bonus
    • The pricing of talent
  • Regulating compensation
    • A need for change?
    • Considerations
      • Equity ownership
    • The next steps
    • Summary
  • Talent portfolio management
    • Leadership and management of human resources
    • Player managers
    • The talent pool as an investment portfolio
    • Future roles in human resource management
  • Conclusion

List of figures and tables

Figure 5.1:    Proportion of total revenue spent on compensation & benefits in the most recent fiscal year
Figure 5.2:    Make-up of the package of senior executives, in addition to salary and pensions
Figure 5.3:    Period over which the long-term incentive plans of executives are vested
Figure 5.4:    Make-up of the package of traders, in addition to salary and pensions
Figure 5.5:    Period over which the long-term incentive plans of traders are vested
Figure 7.1:    Governance concerns as a result of the sub-prime crisis (%)
Table 9.1:    Talent portfolio management model