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Compensation: Time to Question What Is Big Enough: Yes, It's Bonus Time

Though the country is in recession, the public finance business looks great. Volume last year was up 43.2% and new-money underwriting spreads have stayed stable, so one would think that winter bonuses for market professionals would be big and beautiful.

Not necessarily, according to sources. Firms with significant business outside of fixed income might not have done as well last year, and that can reduce the distribution for all divisions.

Besides, when it comes to bonuses, "big" is always a matter of opinion. With the number of experienced public finance professionals in the market declining and the municipal business doing well, bankers and traders unhappy with their bonuses may decide to take off for better opportunities.

"I'm getting a few calls from people not happy with their bonuses," said Richard Baggott of Executive Search Placements Inc. in Boulder, Colo., who specializes in placing public finance bankers.

Bonuses can often exceed a banker's salary. Bonuses first start being discussed in September and are usually awarded between the middle of January through early March. This is also the period that sees the most movement of personnel among firms.

Depending on the firm, traders and salespeople may receive bonuses, or they may get paid strictly through commissions. Some firms award bonuses more than once a year.

The size of a bonus generally depends on three different ingredients, according to Scott Sollers, managing director and chair of Stone & Youngberg in San Francisco. First, the firm has to be profitable. "For firms with diversified revenue sources, sometimes that works better, but last year the IPO market was at a standstill and that had an impact on the big firms' overall profitability," Sollers noted.

The second ingredient is that fixed income has to do well -- which was true of most firms this year, according to Sollers.Finally, he added, the individual has to be productive.

"If the firm is trying to send you a message, you'll see that in your compensation," said one Midwest banker, who asked not to be identified. "Are you furthering the firm's goals? Are you continuing to do pretty consistent business? When we review people, that's what we talk about."

The majority of sources at Wall Street and regional firms said that they expect people to be satisfied with their bonuses because of the high-volume year. But Baggott said he has heard more grumbling than he heard last winter.

"I've heard when some people get their bonuses this year you shouldn't be standing in front of their door," Baggott said. He believed that a significant factor is that there are fewer experienced bankers available than there have been in past years.

"We've had people retire, go over to corporate, try out other businesses," Baggott said. "It's become a bit harder for hiring authorities." He would not identify which firms have been the source of the most resumes.

The New York firm of Roosevelt & Cross already paid its bonuses in December. With the exception of the horror of Sept. 11, Dominick F. Antonelli said it was a good year for the firm and "everyone seems pretty happy with the way they were treated."

"Our business is not a big windfall business -- it's steady," Antonelli said. He said bonuses are based on the kind of year the whole firm had. "We throw it all into one pot."

Sollers noted that people who received good compensation this year would be advised to "salt part of it away -- we might not see this again."

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