Be Careful Who You Work For
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As experienced by Lehman employees, working for an investment bank means you are bearing counterparty risk to your employer. Will this be the next flight to quality?
Talking to a friend who lost his job during Lehman's demise, he specified the amount of money he lost due to his employer's bankruptcy. The non-vested shares he had held in accumulated bonuses added up to a tidy sum which from one day to the next had simply evaporated.
Few people, when they take jobs in banking, consider their employer as a 'risky counterparty' in their employment contract. A counterparty that can go bankrupt and fail to fulfil its contractual obligations.
Nowadays, large chunks of bonuses are paid in shares that vest over the course of three years, which serves the purpose of tying you to your employer - but also exposes you to the risk of your firm failing.
While this would be one of the more extreme scenarios, your employer being taken over by another bank - or by the government for this matter - are more realistic possibilities. And either way, they would have direct implications about the firm's ability and/or willingness to pay up to keep you happy, or to keep you on board at all.
Hence, if it so happens that at some stage you have the opportunity to choose an employer again rather than clinging to your current one trying to avoid the sack, your future employer's standing might become a crucial factor in the decision making process. Clearly, nobody is able to foresee mergers, takeovers and the like, but it will be much more difficult for banks that aren't doing well to attract talent.
After all, joining a company with a substantial multi-year guarantee will only serve you well if the company makes it through those years. If they don't, you might end up filing a claim to administrators, but if your bonus is in equity, there will be a lot of people in front of you in that queue.
Few people, when they take jobs in banking, consider their employer as a 'risky counterparty' in their employment contract. A counterparty that can go bankrupt and fail to fulfil its contractual obligations.
Nowadays, large chunks of bonuses are paid in shares that vest over the course of three years, which serves the purpose of tying you to your employer - but also exposes you to the risk of your firm failing.
While this would be one of the more extreme scenarios, your employer being taken over by another bank - or by the government for this matter - are more realistic possibilities. And either way, they would have direct implications about the firm's ability and/or willingness to pay up to keep you happy, or to keep you on board at all.
Hence, if it so happens that at some stage you have the opportunity to choose an employer again rather than clinging to your current one trying to avoid the sack, your future employer's standing might become a crucial factor in the decision making process. Clearly, nobody is able to foresee mergers, takeovers and the like, but it will be much more difficult for banks that aren't doing well to attract talent.
After all, joining a company with a substantial multi-year guarantee will only serve you well if the company makes it through those years. If they don't, you might end up filing a claim to administrators, but if your bonus is in equity, there will be a lot of people in front of you in that queue.
Here Is The Writer : Square Mylo
Square Mylo came to London with the intention of staying six months and never left. He has worked in Canary Wharf and in the Square Mile, but still maintains a clear conscience since he's never worked in Mayfair. Being a banker is his true calling. Maybe he should have listened more closely.
view more articles by Square Mylo
