JPMorgan Offers Deal to Retain Bear Stearns' Top Talent

Tom Burroughes

26 March 2008

JPMorgan Chase, the US bank which is buying rival Bear Stearns, has launched a staff retention package for Bear Stearns' brokers in a bid to stem a mass exodus of staff. The deal is designed to prevent Bear Stearns' top brokers from fleeing to rival banks and brokerages after Bear Stearns, which was hit last year by massive losses stemming from the credit crunch, was put up for a sale at a fire-sale price earlier this month in a move that shocked financial markets. JPMorgan has increased its offer to buy Bear Stearns to $10 from $2 per share. Even the increased offer would decimate the value of deferred staff compensation, however. The retention bonus, announced to Bear's brokers this week, will give its most productive brokers - those who produced at least $500,000 in commissions and fees over the past year - up to 100 per cent of their annual output. A full 75 per cent of the retention package will be paid up-front in cash, and the rest will be in stock. Advisors can also get an additional bonus, 50 per cent in stock and 50 per cent in cash, based on the average annual rise in their production in the next three years. Those who are producing $250,000 to less than $500,000 will get 50 per cent of their annual production split evenly between cash and stock. Underperforming brokers, deemed to be those who are producing less than $250,000 in annual commissions and fees, will not get a retention package. At present, JPMorgan plans to keep Bear's private client business intact by making it a separate entity from JPMorgan's private client operations.