Bank Shareholders Benefit From Wall Street's Shift

Pay cuts upset workers but reward investors

Traders work at the Barclays booth on the floor of the New York Stock Exchange on Jan. 2, 2013Photograph by Scott Eells/Bloomberg

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By Christine Harper and Michael J Moore

January 4, 2013 at 12:41 AM UTC

This article is for subscribers only.

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This article is part of the January 7, 2013 issue of businessweek.

Shareholders and bondholders who watched compensation costs at the nine largest global investment banks outpace the gain in revenue from 2004 to 2008 are witnessing a shift: Executives are reining in pay to boost returns for investors.

The nine banks—Deutsche Bank, Barclays, JPMorgan Chase, Bank of America, Citigroup, UBS, Credit Suisse, Goldman Sachs, and Morgan Stanley—announced more than 30,000 job cuts in the first nine months of last year, according to data compiled by Bloomberg. Total pay for traders and investment bankers is about half what it was in 2007, according to an October report from Options Group, a recruiting firm. “Shareholders have become a lot more vocal,” says Benjamin Hesse, who manages five financial stock funds at Fidelity Investments. “Managements are taking more shareholder-friendly steps, and that’s really across the board.”