Nomura to triple salaries for starters in old Lehman unit.

This from Bloomberg.

Anyone out in the expat community who had worked in Lehman Japan might know that Nomura took the operations over after Lehman’s bankruptcy almost year and a half ago.

It looks like the entry-level people were being offered about 6 million yen at the time. But Nomura, in its regular operations, might have been offering only 2 or 2.5 million to new Japanese graduates. (This is hard to believe, but maybe not.)

So when Nomura bought Lehman, they were put in the awkward situation of paying some of the 2008-09 “doji” (people entering the company at the same time) maybe triple what others were getting.

If this affected even 50 people I would be surprised. So maybe the original news on this was more a cultural curiosity report than anything earth-shattering.

It’s highly doubtful that Nomura in its New York operations was paying anyone $25,000 to start. When the economy was better, I’m sure even the most basic job there could pay more than twenty-five.

So this year’s new class is going to be put at the same level as what last year’s Lehman class was offered ($72,000), which begs the question of what happens to the Nomura sophomores who had been placed in at 2.5 million yen? ($27,000).

The article suggests that Nomura is catching up with internationalization (the premise is that these finance jobs must be high paying). But the news stateside was that the investment houses [were, uh, are?] filled with a sizable number of incompetent people who were paid way too much.

I like to see young people make their way in life. But maybe Nomura knew what it was doing at the outset? And Lehman had the formula wrong? After all, look which one is still around . . .

2 thoughts on “Nomura to triple salaries for starters in old Lehman unit.

  1. Note the use of the term “some” in the Bloomberg article. That only applies to “Global Employees” whatever that means. Most of the other freshmen will be on standard new hire income levels of about 2.4 Million per year. Refer here:

    http://www.nomura.co.jp/recruit/2011/information/employment.html

    Nomura takes on about 800-1000 people per year. Most of those are likely NOT “Global Employees”:

    http://www.nomuraholdings.com/jp/csr/data/employee.html

    When Nomura bought out Lehman, they were after 2 things: the trading systems and the client base/portfolio. The people were only a minor consideration (and, truth be told a major inconvenience.) They had to take on the people because a) they were the ones that knew the current systems and b) they were the ones that had the trust of the client base.

    In order to keep the Lehman people on board as opposed to having them evacuate en-mass and take their golden parachute with them was to swoop in as fast as possible and promise a fairly huge chunk of change in the form a a guaranteed bonus for 2 years. Nomura didn’t really have a choice if it wanted that portfolio.

    The end of the 2 year guaranteed bonus period is coming up next month. You will probably see a whole lot of ex-Lehman-ex-Nomura people start flooding the job market in April as they are either let go or are “encouraged” to leave or figure there is no point sticking around because the guaranteed bonuses have been paid out in full. That is the nature of the securities business.

    And, yes, there ARE a sizable amount of incompetent people there that are overpaid. Nomura will not be sorry to see the back of them. There will also likely be a number of really good people whose loss might be felt later on but couldn’t be kept on because they couldn’t deal with the Japanese business culture structure of Nomura.

  2. My experience with Lehman in Roppongi was in 2007, when I was called in on a project. As a CPA, I am retiticent to discuss details–even though Lehman was not directly my client. But here goes:

    The work ended up being having to explain how yen-carry trades worked to an Operations unit that had responsibility for the managerial/cost accounting for the activity.

    It was “indicated” that the management felt there was a problem with the computer systems that settled bond trades. And that is why their interest costs had increased 10 fold.

    After about one week of working with that theory, I realized it was bunk. In fact, what happened is the Bank of Japan raised short-term interest rates from near zero (0.05%) to about half-a-percent (0.5%). Ten times the previous rate. (Therefore, ten times the interest if you are borrowing yen overnight.)

    In all honesty, I had to give the answer as I saw it (CPA ethics — objectivity and integrity). I figured the assignment was done there, since that was the answer. But no, management wanted a further study of the computer systems for the legal books, to see if I could find anyway that the yen-carry activities were interfering with the accounting.

    The reality was that the “team” didn’t understand yen-carry trading. If you borrow in yen and then send the money overseas to be converted and invested in Euros, etc., you will be stuck with yen expense in Japan. (You better not deduct this expense, by the way, in Japan, unless you are willing to allocate profit to it. The unit that’s responsible for the profit has to reimburse the cost of funds.)

    As a New Jersey guy, I know all about New York banking arrogance. Seven times out of ten, you are across the table from some, ehem, well, asswipe who bullshitted or asskissed his/her way into the position he holds. (The other three are the more serious ones who make the business.)

    So I have seen plenty of these types before. And I am certain Nomura keeps its share—damn certain.

    It will be interesting to see what happens when the stay pay is paid at Lehman. But what I’ve been told is that most of the Lehman exodus happened already. Or maybe that was just the back office?

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