'The power of employees has increased substantially in the past decade,' says Damian Carnell, a consultant at Towers Perrin. Bankers today are on a par with the self-employed: individuals are brands in themselves, and they can take that brand to the highest bidder.
'The most difficult problem facing banks is that of binding people in emotionally,' says Philip Augar, ex-head of Schroder Securities and author of The Death of Gentlemanly Capitalism. 'You need to engender loyalty to the team and to the firm.'
Loyalty has traditionally been highest in small partnerships, but these are a dying breed. Salomon Brothers and Morgan Stanley floated more than a decade ago. Goldman Sachs came to the market last year. Cazenove's decision to offer itself to the market in 2002 is significant. The bank had seemed to successfully combine the best features of a partnership: low turnover and employee loyalty.
In The Death of Gentlemanly Capitalism, Augar describes the bank as 'the ultimate example of living within one's means'. By coming to the market, Cazenove has indicated that its means are no longer enough.
At quoted banks, stock options have filled the void left by the promise of partnership. ABN Amro recently revealed that the bulk of senior board members' compensation is to be in the form of stock. Goldman Sachs' success in suppressing rising costs can be attributed to its use of stock to reduce cash payouts.
Options bring flexibility. Goldman has widened its use of stock options to cover even the most junior staff. By comparison, ascension to the position of partner is available only to the chosen few. Those not on the ladder to partnership must be retained in the normal way through cash bonuses, and this can be costly.
However, public ownership is not necessarily best. The benefits of offering equity to create owner-employees can disappear when the value of that equity falls. Sharply falling equity prices were a feature of the crisis in 1998. Some banks' shares fell by between one-third and two-thirds in just two months.
The next time that banks' share prices take a battering, the popularity of equity in compensation means that there will be more employees groaning. With the compensation ratio already high, switching to cash payouts risks antagonising external shareholders further. Unlike partners, these shareholders are unlikely to tolerate short-term losses for the sake of longer-term gains.
Bankers' bargaining strength is detrimental to the owners of capital, and, as NatWest of the UK has illustrated, shareholders will not tolerate wealth shifting too far in the direction of labour.
One HR practitioner says: 'If the rainmakers can make a difference then they are worth it. But the worry among shareholders is that there is a fortune being made by mediocre people.
'A lot of shareholders are foreign nationals, and when they see bankers in London making in pounds what bankers in Frankfurt are paid in German marks, they start to question whether it is worth it.'
Conversely, bankers may yet come to question whether shareholders are worth their weight. 'In some areas, the actual magic of super returns belongs to the people. Capital has its risk-adjusted return and when it comes down to it, a fair chunk of the rest belongs to the management team,' says Carnell.
Leading management teams may therefore be better off in boutique firms, which are - surprise, surprise - partnerships. However, if non-rainmakers want to sustain their position as self-interested free agents, then they must allow shareholders to compete on an equal footing. Escalating salaries, plus options, plus guaranteed bonuses have caught shareholders off balance. But in a downturn it is likely to be bankers themselves that are tripped up.