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- 🗞 Morgan Stanley Accused of Faking Exec's Job Title to Fool the ECB | Goldman Sachs' CEO Pay Up 24% ($31MN), Profits Down
🗞 Morgan Stanley Accused of Faking Exec's Job Title to Fool the ECB | Goldman Sachs' CEO Pay Up 24% ($31MN), Profits Down
PLUS: UK Private Schools Eyeing Global Market for Students Amid Fears of Labour Party Win
Afzal Hussein
February 19, 2024
Happy Monday from a sunny, cloudy London.
In this issue:
3 interesting stories
1 career conundrum
In case you missed last week’s issues:
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MORGAN STANLEY
Faking a Job Title to Fool Regulators
A senior employee at Morgan Stanley alleges that they created his job title to deceive European regulators about staff relocation post-Brexit. The employee joined Morgan Stanley in April 2021 in their Frankfurt office earning a salary close to €400,000.
He was an executive director and formally received the title “Head of Loan Trading”. However, he says he was instructed not to ‘actively’ use the title and that the title “only existed on paper“ purely to meet regulatory requirements.
Why is this relevant? Well, European regulators urge international banks to have local, senior staff managing EU business post-Brexit. The Frankfurt court rejected the bank's argument that the banker was a material risk-taker, upholding his appeal against dismissal.
Morgan Stanley disputes the banker's claims and argues that he used the title on his LinkedIn profile. Yet, his job involved origination and the sale of distressed loans rather than managing the significant risk and responsibility that come with the oversight of trading desks.
Changes to German employment law post-Brexit affect material risk-takers' job security. The court ruled that the banker's formal position wasn't sufficient to qualify as a material risk-taker - Morgan Stanley is appealing the verdict.
UK PRIVATE SCHOOLS
Eyeing Global Market Amid Labour Fears
Private schools in England are fearing a potential Labour party win at the next general election. As such, they’re strategising ways to attract more overseas students in anticipation of Labour's proposed imposition of a VAT on their fees. I had no idea private schools didn’t pay taxes. Turns out most of them operate as charities.
Measures being explored by private schools include cutting back on bursaries and scholarships, allowing parents to pay fees in advance, and intensifying recruitment efforts abroad. Labour's pledge to impose VAT on fees is driving the push to recruit more international students, as they’re perceived to be less price sensitive. The private school sector in England has increasingly relied on overseas students, particularly boarders, to compensate for declining domestic demand for boarding.
Schools are diversifying their recruitment efforts to include a broader range of countries due to fluctuations in key markets like China and Russia. Some schools are going as far as acquiring institutions in Europe to mitigate potential VAT issues, as VAT is not charged on private schools in the EU.
Labour's proposed VAT exemption removal could raise education costs by 20%, prompting schools to consider adjustments to fees and expenditure. As such, schools are proactively increasing international recruitment efforts to counter potential VAT-related challenges.
However, although educational consultants and recruiters are observing increased efforts by British private schools to attract overseas students some experts doubt the long-term sustainability of relying on international enrolments.
CAREER CONUNDRUM
How to Ask for a Raise? 🤔
Reader: Male | 24 | New York | Investment Banking | 3 Years Experience
Question: “I’ve been in my current role (M&A) for almost 3 years and I’m not sure how best to go about asking for a larger salary raise. The money is good, but I see no harm in asking for more, especially if I’m working so hard. Any tips would be most useful. Thanks!”
Have any advice for him? Reply to this email (all responses are anonymous) and the best responses will be featured in the next issue later this week.
GOLDMAN SACHS
CEO Pay Up 24%, Profits Down
Goldman Sachs’ CEO David Solomon received a $31 million pay package for 2023, a 24% increase from the previous year, despite the bank reporting its lowest profits in four years.
Solomon faced challenges in 2023, including criticism of his leadership style and job cuts at the bank, but was rewarded by the board for refocusing Goldman's strategy on core investment banking and trading business. His pay package includes a $2 million base salary and a $29 million bonus, primarily in performance-based stock. This marks Solomon's second-most lucrative year running Goldman, behind 2021 when he earned $35 million.
While Solomon's pay increased, overall expenses on remuneration at Goldman only rose by 2% in 2023, despite a reduction of 3,200 employees. CEOs at rival banks JPMorgan and Morgan Stanley also saw pay increases for 2023, with Jamie Dimon and James Gorman receiving $36 million and $37 million respectively. Bank of America's CEO Brian Moynihan, however, had his pay cut by 3% to $29 million.
Goldman reported lower profits in 2023 due to strategic actions such as scaling back its consumer business, but the compensation committee believes these actions were necessary for long-term success. The bank's net income fell by 24% to $8.5 billion, the lowest since 2019, and its return on equity was below target at 7.5%.
Despite these challenges, Goldman is optimistic about its future prospects with a stronger platform for growth in 2024 and beyond.
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