For the first time since Macquarie Bank listed in 1996, pay packets at the Millionaire Factory have fallen, in some cases substantially, despite a 23% increase in headline profit to a record $1.8 billion.
This reflects a couple of key points. The capital base has been expanded from $7.5 billion to $10 billion over the past year due to events such as the $750 million placement at $87 a pop last May.
And the cost of capital has risen along with market interest rates. This meant the overall bonus pool was stagnant despite there now being 13,000 hungry Macquarie mouths to feed, 40% of which are offshore.
Here’s how the big five bankers shape up on pages 94-95 of the annual report:
- Allan Moss: the outgoing CEO’s salary was stagnant at $670,000, bonus up from $23.8 million to $27.9 million but overall package down from $33.5 million to $24.75 million because of losses of $4.9 million on investments in the long-term profit share account.
- Nicholas Moore: the incoming CEO’s salary was stagnant at $517,000, bonus down from $23.3 million to $19.24 million, lost $2.2 million on the long-term profit account so overall package down from $32.9 million to $26.75 million.
- Michael Carapiet: Moore’s understudy who takes over the investment banking and funds business but saw his overall package drop from $22.9 million to $19.15 million.
- Kim Burke: a stellar performance from equity markets saw his overall package rise from $14.6 million to $18.7 million.
- Andrew Downe: the treasury and trading chief slipped from $21.5 million to $14.9 million despite a strong performance, with the exception of credit markets.
The big five collected $107.4 million between them – the lowest figure for three years – and no-one else got above $5 million, when there were eight bankers above $10 million in the previous year.
The woes in property saw neither Stephen Girdis or Tony Gill, who replaced Bill Moss when he quit in February 2007 collecting $30.6 million in his final year, appear in the highest paid executives, so the pay for performance mantra really does apply when a division falters.
The overall presentation today was notable for the emphasis on risk management. Investors were told that the risk management division now has more than 330 staff and remains headed by the much-feted Nick Minogue whose pay dropped from $6.4 million to $4.8 million.
The new pay structure for the top brass, with a greater emphasis on long-term equity incentives rather than short-term cash bonuses, should see shareholders approve the remuneration report with less complaint this year.
Nicholas Moore is certainly steaming ahead with plenty of skin in the game. He paid $6.7 million exercising 216,000 options over the year at an average price of $31, lifting his total holding to 843,113 shares. These are worth $53.7 million with Macquarie shares down 3.69% or $2.44 to $63.66 by 11.15am on concern about Moore’s comment that “it will be challenging to repeat last year’s record performance, but this may be achievable.”
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While chairman David Clarke still owes the bank $35 million on his stake, Moore’s loan is just $12.25 million and he’s got a stack of investments in the various funds as well, suggesting he should be on the BRW Rich List, which is coming out shortly.