HONG KONG, May 10 (Reuters) - Nomura managing directors must wait a mandatory five-year deferral period before cashing in the share portion of their bonuses, sources said on Thursday, the longest range of its kind for any payout at an investment bank in the 2011-12 pay cycle.
Last year, Nomura and other investment banks moved to make employees wait for three years to cash out the share portion of an annual bonus, wh ich for managing directors in the industry can be at least $1 million in cash and shares.
Moving to a five-year vesting period for all managing directors sets Nomura apart from the rest of the sector, and is the first time in recent memory that an investment bank has extended stock awards for an entire group of bankers over such a long stretch. Unlike most banks, Nomura’s fiscal year ends on March 31. Bonuses are communicated in early May.
The bank’s bonus plan underscores the changes ripping through the banking industry, among them a massive overhaul in how bankers are compensated following the 2008 financial crisis and new global regulations.
“Nobody has done it that long. Five years is very unique,” said an executive recruiter who works with investment banks. “It’s caused a bit of a splash at Nomura,” said the head hunter, who did not want to be named because he works with the bank.
Nomura, like most other banks, saw a decrease across the board in annual pay and bonus, according to sources. Reducing Nomura’s costs, including the amount it pays its senior bankers, forms a big part of CEO Kenichi Watanabe’s drive to address the firm’s relatively weak earnings power.
Nomura registered an annualised return-on-equity of just 0.6 percent, compared with Goldman Sachs’ 12.2 percent.
Some senior managing directors at Nomura were told that their entire 2011-12 bonus would be a five-year stock deferral, according to a source, who did not mention how many. Younger managing directors at the bank would be given cash as part of their bonus, along with the stock deferral, the source said.
In addition to cash and stock, Nomura offers employees a unique stock award scheme that allows them to cash out of certain shares on a quarterly basis, sources said.
A Tokyo-based spokesman for Nomura declined to comment.
Reporting by Michael Flaherty and Denny Thomas Additional reporting by Lawrence White, Nishant Kumar, Emi Emoto and Nathan Layne; Editing by Ed Lane