Normally, if someone was to give me a large sum of money, say £1 million or so, I'd be quite pleased, writes Lucy Kellaway
But if I was an investment banker, I probably wouldn't be. Just like the thousands of them who at this time of year will be receiving more than £1 million, I'd be eaten up with insecurity, envy and greed.
The granting of investment bank bonuses is one of the oddest compensation systems ever. In fact, it's not a system at all: it is a ruinously expensive, tiring and highly political game in which almost everyone emerges a loser. The rules of the game aren't obvious to the outsider, but last week I took some lessons from a couple of master players and I think I can now explain roughly how to play. The game starts each year before the leaves on the trees start to colour. From July onwards, senior managers are locked in endless meetings to decide how much to pay out. By September, all investment bankers have started to lobby as if their lives depended on it.
One banker says that his firm's internal meetings are sparsely attended all year but, in autumn, are packed as everyone fights to be seen. In corridors all over the City and Wall Street, investment bankers are talking loudly and authoritatively about successful deals they weren't involved in, creating the idea they had been. Even more loudly, they are dropping hints that they might be about to jump ship - in spite of the fact that times are sufficiently bad that no one much is going anywhere.
Senior bankers are busy with pre-bonus lobbying of the newspapers. One banker, voice cold with envy and spite, drew my attention to a puffy diary piece that one of his colleagues had skilfully placed in a UK paper last week. It works, he said bitterly. Another matter-of-factly informed me that he asks his clients to write letters saying how invaluable he has been in helping them create shareholder value. He then circulates the letter to all his seniors.
Everyone seems to play games like this: not doing so is a grave error. The boss is trying to pay everyone as little as he can get away with - and trying to have a quiet life. So underlings who don't seem on the verge of jumping ship and who don't make a fuss are crying out to be passed over.
Playing the game too assiduously can have a cost too. I know one investment banking boss who penalises underlings for lobbying crassly. He gets so tired of the frenzied rabble outside his office door blowing their own trumpets that he quietly deducts $10,000 from the bonus of anyone who is being too obstreperous.
By the time the big day arrives everybody is in a state of towering anxiety. The running order is important. Most bosses are relatively weak and so have the easy conversations first. To get called in at 9am is a good sign. The boss then comments on the banker's stellar performance, but says 2007 has been a difficult year for the bank and that times are tight. He then mentions the "number". Note that when the money is this close to being handed out, it is no longer called a bonus. It is more brutal than that: it is a number. Even if the number is high, the banker must still look devastated and protest: "I shot the lights out last year. I'll have to think about it." This little charade won't secure any more for this year but it will put a marker down for next. And the boss may well approve of the moan: he will take it to be a sign of hunger, and hunger is good.
Afterwards the banker returns to his desk, giving no clue to the fact he is $5 million richer.
The bad interviews come later in the day and last longer. The recipients will be dismayed. A 28-year-old analyst protested to his boss last week that he really couldn't live on less than $1 million and that a swanky flat had been bought in expectation of something much bigger. "That's not a bonus! It's a tip!" another distraught banker exclaimed last year on hearing that his "number" was $250,000.
Over magnums of Bollinger, news of others' numbers come spewing out. And then, human nature being what it is, any initial pleasure quickly goes flat. A $4 million bonus may seem insulting if someone else is rumoured to have got $4.5 million. In the end it isn't about money. It is about love.
Investment bankers are competitive over-achievers desperate for recognition. And they get it by getting a bigger bonus than their colleagues.
So how could the "system" be made better? At one boutique investment bank, the scope for politicking and sucking up is reduced as the bosses tell all 50 partners what each other got: last year the range was from zero to about $10 million. Apparently this makes them behave like grown-ups and they go round slapping each other on the back saying: "I saw your number. You had a cracking year last year, you deserve it."
Transparency would be a new thing to the big houses - at the moment the only thing that is transparent is the games bankers play. But I doubt if it will happen. For managers, secrecy is power. And in this dog-eat-dog world, if money can't be depended on to bring one any sense of achievement, power is all one has left.
