The Kareem Serageldin case is a reminder that senior bankers were once paid $7m a year, of which only 4% was their base salary
We have, in theory, come a long way. Following the introduction of the European Union's compensation rules and the FSA's compensation code, bonuses have fallen and are generally considered to be more heavily deferred. Salaries have risen and banks have been lumbered with unmanageable fixed costs. There has even been EU-talk of capping bonuses at 100% of salaries.
It's illuminating, therefore, that only five years' ago, Kareem Serageldin - the former global head of structured credit trading at Credit Suisse who now faces 45 years in prison on charges of conspiracy, falsification of books and wire fraud charges, was paid a total of $7,279,487. Of this, only $279,497 (£171k) was his basic salary. The remainder of Serageldin's 2007 pay package was divided between his cash bonus ($1.7m) and his deferred Credit Suisse 'Master Share Plan Incentive Share Unit Award' ($5.3m).
Today, salaries for MDs in London are anything from £200-£400k and Credit Suisse has theoretically introduced a stricter deferral regime. If Serageldin were in receipt of a $7m bonus for 2011, 80% would have been deferred. However, 80% of $7m is $5.6m - suggesting Credit Suisse's new approach to remuneration isn't very much more punitive after all. In 2007 $5.3m was deferred; in 2011 $5.6m would have been. And 2011's bankers had the benefit of another £100k or so on their salaries.
Needless to say, the deferred portion of Serageldin's 2007 pay has been clawed back. However, he's kept the remaining $1.9m.
Details of his pay are contained in the indictment from the US District Court, Southern District of New York. The indictment also includes various snippets of conversation from Serageldin and his alleged co-conspirators as they struggled to avoid marking down their book in order to maintain their P&L. Serageldin was also in line for a big promotion at Credit Suisse and allegedly didn't want to do anything to jeopardise this.
“People are expecting us to make money," he allegedly said in January 208. "[The head of CS’s investment bank] knows what our positions are. Today we have to be up at least $10m bucks."
Ultimately, the book run by Serageldin was written down by $540m.
Yesterday, Serageldin appeared in court in London. Having been bailed for £150k, he's now compelled to wear an electronic tagging device until his next court appearance in November. A US citizen (who now wants to stay in the UK), Serageldin moved from Egypt to America as a child and studied at Yale. He grew up in North Carolina, where is mother, an author and academic with a popular blog on Egypt, describes being a 'hockey mom.'