James Gorman speaks his mind about employee complaints on pay in the FT and on Bloomberg TV
Speaking to the Financial Times yesterday, James Gorman of Morgan Stanley, declared that pay packages in the investment banking sector were still at an unsustainable level.
‘There’s way too much capacity and compensation is way too high,’ he said. ‘As a shareholder, I’m sort of sympathetic to the shareholder view that the industry is still overpaid.’
The investment bank is laying off 7 percent of its staff and planning another round of job cuts next year in an attempt to increase its return on equity, currently at 5 percent ‒ a far cry from its pre-crisis level of 23 percent.
Gorman is attempting to restructure the bank’s business model, focusing on the development of steady revenue from retail brokerage and wealth management, instead of trading income, which is inherently more volatile, explains the FT.
Further cost-cutting is expected from lowering pay and bonuses, including entry-level salaries awarded to the new recruits from the bank’s analyst program.
Morgan Stanley isn’t the only bank cutting down on recruitment expenses. A few weeks ago, Goldman Sachs declared it was scaling back its famous two-year graduate program, narrowing it down to an even smaller group of elite graduates and cutting out the bonus element from the position’s $70,000 yearly salary.
Gorman also spoke his mind in an interview with Bloomberg TV, urging disgruntled employees at Morgan Stanley who complained about their paycheck to ‘read the newspaper’.
‘If you put your compensation in a one-year context to define your overall level of happiness, you have a problem that is much bigger than the job,’ he told the reporter. ‘If you’re really unhappy, just leave.’
The other major investment banks implementing vast job cuts include Deutsche Bank, Citigroup, Credit Suisse and UBS.