An amusement

There might well be whining about this sort of thing:

However, Santander later decided not to proceed with the appointment due to the “unacceptable” costs of compensating him for past remuneration from UBS following months of talks with the Swiss bank.

Mr Orcel, who is now the chief executive of Italian bank UniCredit, claimed tens of millions in lost pay and has now walked off almost £60m richer after winning his battle.

According to a ruling seen by Bloomberg, Mr Orcel’s contract was valid and the bank broke it by u-turning on the appointment.

Santander’s decision not to hire Mr Orcel in 2019 raised eyebrows across the finance industry as banks routinely buy new hires out of their long-term compensation schemes and should be adept at determining the cost.

60 million golden hello? Pah!

Except. If we do agree that we want bankers to be paid over time, not in a cash sum right after an orgy of deal making – you know, long term incentives, not short – then it’s going to mean that folks build up rewards from those long term incentives. Which they will lose if they leave the organisation, that’s what they’re for. So, if someone wants that individual then they’re going to have to cover what they lose by moving.

It’s exactly because bankers do get long term, not short, incentives that means bankers are expensive to entice.

4 thoughts on “An amusement”

  1. He had a higher price because he turned out to be better at banking than Santander expected. So they didn’t want him.

  2. djc
    But the payout would be funded by your new employer – so if you are a banking bigwig, it just raises your reservation wage in your job search. Your current employer gets the long-term benefit (if any) of your sage approach to banking without having to pay for it. They win, although they lose the future benefit of your banking acumen. Your new employer gets to pay for your past success, whether realized or merely anticipated, and has to hope it continues. That’s a bet they are making anyways, although this raises the stakes somewhat.

  3. dcardno. Maybe, but that still leaves the moral hazard the delayed bonus was intended to prevent. Say, I have been successful in the past, if those deals still look good in the future I get a bonus. That is an incentive to make deals of lasting value. But suppose halfway to that bonus there is an opportunity to realise the NPV. The incentive to work to a shorter horizon is there.

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