Analysis: The world is not enough

Dan Gledhill and Rupert Wright on the phenomenon of the City bankers, whose aspirations are even greater than their bonuses; Banks are losing the battle to hold on to their star performers

Some people are just never satisfied. Just ask Donaldson Lufkin Jenrette. The American investment bank was paying Tim Weller top dollar, but still the telecoms analyst decided to leave. Not that his decision can be questioned with hindsight. Last month, he floated the company he left to set up, Akamai Technologies, and amassed a paper fortune of $200m (pounds 123m), a figure not even the might of Wall Street could match.

Morgan Stanley Dean Witter is also concerned. Mary Meeker, their star internet analyst who has a flawless stock-picking record, is this week expected to receive a $15m bonus. Ms Meeker, of Woodside, San Francisco, is a neighbour and friend of many of America's richest cyber moguls and may be tempted to sample life on the even more lucrative other side of the garden fence.

None of this should come as a surprise. True, over the next three months Wall Street banks will pay out bonuses worth at least pounds 8bn. Even Henry Paulson, the chairman of Goldman Sachs who is rarely drawn on matters as vulgar as bonuses, is predicting a 30 per cent hike in payouts. Hard- nosed bankers like Mr Paulson, who last week decided how to apportion Goldman's expected 1999 profits of $2.5m, do not give away vast bonuses unless they really have to.

But at the moment such munificence is called for like never before. Banks in London, New York and elsewhere are having unprecedented difficulty recruiting and keeping staff. The problem is the vast and instant fortunes being made by internet entrepreneurs. "There is a lot of competition out there," bemoaned one senior investment baker. "We are having a great deal of difficulty recruiting from business schools."

Even the receipt of the $15m paid to the likes of Ms Meeker does not guarantee loyalty. The director of human resources at another bank says: "People are seeing the potential for making very rapid fortunes with internet flotations. It is the appeal of an industry where you can earn $5m in stock options in less than a year."

It is not just a matter of pay, according to Chris Wightman. He left Nationsbank three years ago to set up his own private equity and investment bank, Equinox. "Banks don't mind paying big bonuses to traders", he says. "But they don't reward you if you are building a business. If you work for a large institution you have no control. Your fate is at the whim of the management."

Banks traditionally have tried to lock in star performers by deferring up to half their annual goldmines for up to five years. It is a tactic that no longer works, according to Yale Tauber, at William M Mercer, a US human resources consultancy. "You can never keep enough cash back to prevent someone from leaving." he says. "It just makes it more expensive for the next firm to hire him."

Some banks have tried to stem the exodus of talent by creating internal funds that are designed to recreate the rewards that can be generated by internet start-ups. Lehman Brothers runs such a scheme, but others fear that they create conflicts of interest and distract employees from the job in hand.

The voracity of the internet sector has reached such lengths that the brightest business school talent is being plucked long before the banks can get a look in. In the US, venture capitalists have enticed many MBA undergraduates to drop out of courses early with the promise of multi- million dollar backing for their ideas. Ambivalent students might reflect that failing to finish his Harvard degree never did Bill Gates any harm. The only ammunition with which banks can reply is the ever-increasing starting salary.

One banker says: "Junior analysts straight out of college are earning at least $200,000 in their first year with a guarantee that that will go up to $280,000 in the second year. And still they are leaving to join start-up ventures."

The UK's internet sector is years behind America's, but its appeal is growing. The university milk round, when many penurious students used to be wowed by a pounds 25,000 starting salary, no longer has the same appeal. Applications for graduate jobs in the City have fallen dramatically. It is an amazing reversal of fortune from last year, when cost-conscious banks tried to recoup their trading losses by slashing their intake.

Nevertheless, there are ways in which the cyber dollar can never match the (relatively) secure and regular income from Wall Street, according to Mr Tauber. "Wall Street has not been affected as badly as management consultancy firms. These bankers have established lifestyles with multi- million dollar homes. That's an expensive nut to crack. Long-term, Silicon Valley can ensure your estate grows, but it does not provide the cash- flow."

Avarice is fine. But those guar-anteed riches on Wall Street and the City are hard to leave behind.

Start your day with The Independent, sign up for daily news emails
wimbledonScot will face Ivo Karlovic next
Hillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test