Friday, December 10, 2004
Call Rob Deutsch at CIBC
CIBC pays with shares that vest
By ANDREW WILLIS
From Friday's Globe and Mail
UPDATED AT 1:42 AM EST Friday, Dec 10, 2004
David Kassie made a lot of money for CIBC World Markets when he was chief executive officer. Now he's making the most junior of his former colleagues wealthier by working somewhere else.
With Mr. Kassie just weeks away from launching a brokerage house, called Genuity Capital Partners, his old employer opened the vault last week, in part to retain staff.
CIBC World Markets is doling out restricted shares in its parent, Canadian Imperial Bank of Commerce, to more than 50 young-but-promising deal makers, individuals in the early stages of their careers. Packages that range to nearly $100,000 worth of stock — from 500 to 1,000 CIBC shares, which won't vest for up to three years — have been promised to high fliers across every department, including corporate finance, mergers and acquisitions, equities and bonds.
The shares, a new perk to the “Chairman's Awards” program, come on top of regular cash and stock-based compensation. The dealer pays its staff on Dec. 17.
A spokesman for the bank played down the defensive role of the payments in light of Genuity's launch, saying the plan is meant to build team spirit and “jump-start equity holdings in the bank, for high performers in the mid-ranks.”
Compensation experts say handing out stock is a smart strategy for an investment bank, on a number of levels.
“Equity, in any form, is a great thing, especially for younger bankers, as it builds ownership, and makes them focus on more than just their own personal results,” said Edward Elliott, a New York-based principal at Towers Perrin who designs compensation schemes for dealers.
“The other thing that makes these people tick is advancement, and this program signals to individuals that they are destined for greater things” said Mr. Elliott, a former investment banker. “Just being singled out as high potential is a very big deal.”
Loyalty-through-equity is a relatively new concept at the bank-owned brokerage houses. A bonus traditionally was paid in a single cheque, and many talented individuals saw themselves as free agents. That's changed in the past five years, as big banks took steps to ensure they kept their best people.
Shares that vest over time now make up at least 50 per cent of most investment banking paycheques.
Anyone who quits a dealer for a rival says goodbye to those restricted shares. So all-stars who walk can leave up to a half a year's compensation behind.
And after a solid year, top CIBC World Markets players can look forward to $3-million-plus packages. For the top dogs, the rewards are even richer: Mr. Kassie banked $14-million in the best of his 25 years at the bank, and left in February with more than $50-million of stock and options.
When it comes to making career decisions on the Street, money is a big factor, but it's not the only factor.
“I'd say compensation is about 60 per cent of the equation,” said one senior banker who has worked at three houses. “The rest of your motivation is split between the opportunities you see, and whether or not you're having fun.”
“There are times when you can throw as much money as you want on the table, and you're not going to get someone to stay,” said Towers Perrin's Mr. Elliott. He added that large dealers who want to grab top talent will simply cut a cheque to pay the new hire for any compensation left on the table at the former employer.
If retention pay is a carrot for dealers as they try to keep employees, the courts are the stick. While CIBC World Markets hasn't fired any public legal broadsides, the dealer can take comfort from the fact that recent judgments have gone against brokerage houses that tried to poach teams of talent from rivals.
Last month, Merrill Lynch got dinged for $2.25-million after a B.C. judge found the dealer crossed the line in recruiting a dozen stockbrokers at a RBC Dominion Securities branch, along with their client records, in Cranbrook, B.C.
Every dealer on the Street, including Genuity and CIBC World Markets, will be out looking for talent in coming weeks, after employees at the bank-owned dealers cash their bonus cheques. Mr. Kassie and his partners at Genuity — mostly former CIBC World markets executives — are offering the thrill of owning a stake in a startup business.
While those involved remain tight-lipped on their plans, individuals who have discussed working at Genuity say it will be an institutional brokerage house, focused on mid- to large-capitalization Canadian companies. Genuity is recruiting at least 40 partners to advise on deals, along with trading and research teams, and is also said to be planning both a merchant bank and a fund that will lend money to corporate clients.
© 2004 Bell Globemedia Publishing Inc. All Rights Reserved.
By ANDREW WILLIS
From Friday's Globe and Mail
UPDATED AT 1:42 AM EST Friday, Dec 10, 2004
David Kassie made a lot of money for CIBC World Markets when he was chief executive officer. Now he's making the most junior of his former colleagues wealthier by working somewhere else.
With Mr. Kassie just weeks away from launching a brokerage house, called Genuity Capital Partners, his old employer opened the vault last week, in part to retain staff.
CIBC World Markets is doling out restricted shares in its parent, Canadian Imperial Bank of Commerce, to more than 50 young-but-promising deal makers, individuals in the early stages of their careers. Packages that range to nearly $100,000 worth of stock — from 500 to 1,000 CIBC shares, which won't vest for up to three years — have been promised to high fliers across every department, including corporate finance, mergers and acquisitions, equities and bonds.
The shares, a new perk to the “Chairman's Awards” program, come on top of regular cash and stock-based compensation. The dealer pays its staff on Dec. 17.
A spokesman for the bank played down the defensive role of the payments in light of Genuity's launch, saying the plan is meant to build team spirit and “jump-start equity holdings in the bank, for high performers in the mid-ranks.”
Compensation experts say handing out stock is a smart strategy for an investment bank, on a number of levels.
“Equity, in any form, is a great thing, especially for younger bankers, as it builds ownership, and makes them focus on more than just their own personal results,” said Edward Elliott, a New York-based principal at Towers Perrin who designs compensation schemes for dealers.
“The other thing that makes these people tick is advancement, and this program signals to individuals that they are destined for greater things” said Mr. Elliott, a former investment banker. “Just being singled out as high potential is a very big deal.”
Loyalty-through-equity is a relatively new concept at the bank-owned brokerage houses. A bonus traditionally was paid in a single cheque, and many talented individuals saw themselves as free agents. That's changed in the past five years, as big banks took steps to ensure they kept their best people.
Shares that vest over time now make up at least 50 per cent of most investment banking paycheques.
Anyone who quits a dealer for a rival says goodbye to those restricted shares. So all-stars who walk can leave up to a half a year's compensation behind.
And after a solid year, top CIBC World Markets players can look forward to $3-million-plus packages. For the top dogs, the rewards are even richer: Mr. Kassie banked $14-million in the best of his 25 years at the bank, and left in February with more than $50-million of stock and options.
When it comes to making career decisions on the Street, money is a big factor, but it's not the only factor.
“I'd say compensation is about 60 per cent of the equation,” said one senior banker who has worked at three houses. “The rest of your motivation is split between the opportunities you see, and whether or not you're having fun.”
“There are times when you can throw as much money as you want on the table, and you're not going to get someone to stay,” said Towers Perrin's Mr. Elliott. He added that large dealers who want to grab top talent will simply cut a cheque to pay the new hire for any compensation left on the table at the former employer.
If retention pay is a carrot for dealers as they try to keep employees, the courts are the stick. While CIBC World Markets hasn't fired any public legal broadsides, the dealer can take comfort from the fact that recent judgments have gone against brokerage houses that tried to poach teams of talent from rivals.
Last month, Merrill Lynch got dinged for $2.25-million after a B.C. judge found the dealer crossed the line in recruiting a dozen stockbrokers at a RBC Dominion Securities branch, along with their client records, in Cranbrook, B.C.
Every dealer on the Street, including Genuity and CIBC World Markets, will be out looking for talent in coming weeks, after employees at the bank-owned dealers cash their bonus cheques. Mr. Kassie and his partners at Genuity — mostly former CIBC World markets executives — are offering the thrill of owning a stake in a startup business.
While those involved remain tight-lipped on their plans, individuals who have discussed working at Genuity say it will be an institutional brokerage house, focused on mid- to large-capitalization Canadian companies. Genuity is recruiting at least 40 partners to advise on deals, along with trading and research teams, and is also said to be planning both a merchant bank and a fund that will lend money to corporate clients.
© 2004 Bell Globemedia Publishing Inc. All Rights Reserved.
# posted by Tom @ 3:56 PM 
