Boswell Group

Deal Journal: Beware the Wall Street Salary Monster

An up-to-the-minute take on deals and deal makers.

Cites consultant Kerry J. Sulkowicz
Featured on Wall Street Journal Online
06.30.2009

On Wall Street, bonuses are out, bigger salaries are in.

J.P. Morgan Chase is the latest bank to consider boosting salaries for its workers, according to the New York Post, rather than rely on the old bonus system. Citigroup and Bank of America also have signaled their intent to increase salaries to keep talent from jumping ship.

But as Wall Street seeks to skirt public outcry over bonuses, it could be creating a different kind of compensation monster.

Deal Journal asked Kerry Sulkowicz, a clinical professor of psychiatry at the New York University School of Medicine and managing principal at Boswell Group, which consults with chief executives at financial firms and in other industries on workplace culture and leadership, for his thoughts on Wall Street’s move toward bigger salaries. Here are some excerpts.

Deal Journal: Is it a good idea to increase salaries on Wall Street instead of giving employees large bonuses.

Kerry Sulkowicz: It seems like a transparent way to circumvent the outcry against bonuses. But it’s short-term thinking about a longer-term problem. If you look a few years out, it’s going to be hard to roll back these inflated salaries, which don’t necessarily have a bearing on how good a job an employee is doing.

DJ: How should Wall Street try to retain talented workers in the current environment?

Sulkowicz: I understand that money may be the most important thing. But firms have to pay attention to developing loyalty in other ways. People I know who work at J.P. Morgan talk about how they have great pride in working there because they believe in the leadership of CEO Jamie Dimon. By comparison, the people I talk to at Citigroup are not particularly happy or inspired. They might stay there because they don’t have a choice, not because the leaders inspire that kind of following. The downside of loyalty is what happened at Lehman, where some senior executives felt a great sense of pride, but that can create an insular culture and you can miss out on certain problems.

DJ: Are there any studies on how different types of compensation affect workplace psychology?

Sulkowicz: Not that I am aware of, but there should be.

DJ: Are Wall Street bonuses a thing of the past.

Sulkowicz: Bonuses have a bad connotation at the moment. But my sense is that as the crisis fades, bonuses will be back.