Fund managers, according to one report, at John Duffield's newly floated New Star Asset Management are not being paid bonuses. A good idea?
Not only are the end of year-extras non-existent at New Star, The Financial Times says salaries at the fund management group are also low, begging the question why anyone would choose to work there.
Headhunters say the compensation scheme at New Star is unusual, and perhaps ill-advised: "In terms of total compensation, people at New Star are paid on a comparable basis to others in the industry," says Kim Yates, director of the asset management division at executive search firm Principal Search. The crucial difference, says Yates, is that New Star's hot managers are paid hefty salaries to compensate for their absent bonuses, an arrangement at odds with industry norms.
Yates says normal base salaries are rarely higher than $150,000, with standard bonuses doubling that figure. New Star managers could therefore be on salaries in the neighborhood of 300,000.
Yates describes it as 'absolutely extraordinary.' "Most fund managers are seeking to make pay much more performance driven," she says. "But New Star's [pay] model assumes that they're employing the best people who will always deliver the best for the business. And they will be rewarded even if they don't!"
Would you work without a bonus if your salary were high enough? Should other firms follow suit?
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