Page last updated at 17:12 GMT, Thursday, 26 November 2009

Who are the City workers on a 1m a year?

Commuters walking across across Waterloo Bridge

By Caroline McClatchey
BBC News

City salaries are back in the headlines as a new report suggests UK banks should tell the public how many of their employees earn more than £1m a year. But who are the people with the mega pay packets and what do they do?

There has always been a prurient interest in the pay and indulgent lifestyles of superstar traders and their big bosses. But the financial crisis has seen them become public enemy number one.

The latest review into banks has no doubt made people ask exactly how many bankers earn more than £1m and what do they do to warrant that amount?

A banker walking through the City of London
Some 280,000 people work in finance in London

John Purcell is managing director of the City headhunters Purcell & Co. His firm is involved in senior appointments in banking and industry - including CFOs (chief financial officers), CROs (chief risk officers) and other senior executives.

He said there was a significant difference between an investment and a commercial or High Street bank - and not just in terms of functionality.

"There's much more money to be made in investment banking - that's why it attracts such a high calibre of people," he said.

Talking about the investment banking world, he said the usual figure quoted was that less than 10,000 people in the City earned more than £1m in total compensation - and some 280,000 people work in finance in London's Square Mile and Canary Wharf area.

Their compensation comprises basic salary, performance related pay or bonuses, expenses and LTIP's - Long Term Incentive Packages.

'Title inflation'

According to Mr Purcell, the starting grade is analyst, associate - if you have a master's degree in business - proceeding to vice president and then director or executive director.

The people who run the various divisions of the bank are called managing directors. At the top of the pyramid is the CEO.

The higher you go, the smaller the percentage of your overall compensation is in basic salary
John Purcell

He said banking was famous for "title inflation" and while "vice president" sounded very grand to the general public, it was a few rungs down from the top of the ladder.

In the biggest banks, there will be multiple managing directors running all the constituent parts of the business and this is the grade where the million-pound packages come into play.

Mr Purcell said their basic would be less than £500,000.

"The higher you go, the smaller the percentage of your overall compensation is in basic salary," he said.

"This is in order to align the interests of the individual with the interests of the bank as a whole."

In commercial banks, which have investment arms, he said the £1m pay packets would be the preserve of board-level directors, and their basic would be about £300,000.

Although Mr Purcell blamed the "short-termist and greedy" behaviour of some bankers for the crisis which ensued, he said all those in investment banking worked "very, very hard".

As London and New York were the two most important financial centres, he added, they paid the best and therefore attracted the best.

'Dogsbody analysts'

Tineke Purnell worked in the banking industry in London for 10 years.

For more than five of those years, she was a personal assistant at the US investment giant Lehman Brothers, a high-profile casualty of the global financial crisis.

What colleagues earn is a bone of contention in offices around the world but despite working in an industry where million-pound packages seem almost commonplace, Ms Purnell said there was little negativity.

People within the banking industry understood why some of their colleagues pocketed such salaries, she said.

The 36-year-old, who now works for a property company, said analysts were used as "dogsbodies", working "on complicated spreadsheets and reports".

For some, the day started at 0600 and could sometimes finish at two the following morning.

"They go home, shower and do it all over again. That is their life for several years," said Ms Purnell.

"If they don't burn out and get to their million-pound salaries, no-one I know would begrudge them that.

"We were not jealous of their salaries because we were being looked after too."

A trader at the New York Stock Exchange
Traders may earn a packet but it is a high-octane job

She said managers higher up the ladder worked less but the "buck stopped with them".

A trader had a limited life span because of the frenetic nature of their work, she added, so they would not be earning millions for all their working years.

Leading economist John Kay said no other industry in the world had as many high earners.

"The people who earn these amounts of money are traders and investment bankers dealing with large corporations," he said.

"It is not the bank managers at your local branch."

He said most people had "no idea what these guys do" and that the public was right to be "suspicious", particularly after taxpayers' money had been used to bail the banks out.

Lawyers and accountants earning more than £1m probably also worked for City firms and the only others taking home that level of income were the bosses of big corporations, he added.

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