Michael Bonner
Principal [email protected] 646-486-9744
Bonnie Schindler
Principal [email protected] 847-636-8919
Louisa Heywood
Associate [email protected] 646-568-1160
Thomas Brown
Analyst [email protected] 646-568-1159


CAP reviewed executive compensation and firm performance at 11 publicly traded investment banks with revenue ranging from $200 million to $11 billion. This report summarizes key findings on the relationship between executive pay and financial performance, share usage, and expectations for compensation for 2023 performance in the investment banking industry.

Key Takeaways


2022 Performance: Following a strong 2021, revenue was generally down for publicly traded, advisory-focused investment banks in 2022 as deal volume and size decreased due to high interest rates and economic uncertainty. Among the investment banks in our study, revenue decreased 20% at median.


2022 Compensation: In line with the decrease in revenue, total compensation for Chief Executive Officers (CEOs) decreased 21% at median from the 2021 to 2022 performance years. (2022 is the most recent year for which top executive pay is disclosed.) Compensation was down 22% for other named executive officers (NEOs).


2023 Expectations: Despite a brief midyear increase in mergers and acquisitions (M&A), 2023 is shaping up to be another down year. At median, 2023 revenue is expected to decrease 8% vs. 2022 among the banks in our study. As a result, CAP expects compensation granted for 2023 performance to be flat or down relative to 2022, in line with revenue, following significant decreases in compensation for 2022.

Performance and Executive Compensation Down in 2022

Following a strong 2021, performance was down in 2022. Lower performance during 2022 was attributed to decreased deal volume and deal size as a result of high interest rates and economic uncertainty.

Publicly Traded Investment Banks: Financial Summary
(Median Change from Prior Year)






Net Income



Operating Income (EBT)



Operating Income (EBT) Margin

+5.2 pts

-8.7 pts

Comp. & Benefits Ratio

-1.6 pts

+1.4 pts

Comp. & Benefits Expense



1-Year TSR



Investment banks link compensation closely to revenue. In 2021, both revenue and CEO pay increased by more than 30% at median. Conversely, in 2022, both revenue and CEO pay decreased approximately 20% at median.

37%-20%33%-21%-30%-20%-10%0%10%20%30%40%2020-20212021-2022Median Δ in Revenue vs. Median Δ in CEO Total CompMed. Δ in Rev.Med. Δ in CEO Total Comp

Compensation for other named executive officers, both staff roles such as Chief Financial Officer (CFO) and business leaders, decreased similarly at approximately 20% at median.

Revenue as a Driver of Compensation

The link between changes in revenue and changes in compensation also goes beyond the C-suite. CAP research finds a strong relationship between the change in a company’s revenue and the change in compensation and benefits expense. The analysis finds that, over the past six years, for every 1.0% change in revenue, compensation and benefits expense changes 0.87%.

R² = 0.84-50%-25%0%25%50%75%100%-50%-25%0%25%50%75% in Compensation &Benefits Expense in RevenueΔ in Revenue vs. Δ in Compensation & Benefits Expense2016-2022

2022 was somewhat of an outlier over this period. The median revenue decrease for the 2022 fiscal year was 20%, while the median decrease in compensation and benefits expenses for all employees was 9%. The relationship was less strong in 2022 likely because of certain one-time compensation costs that are not tied to performance, such as severance costs related to reductions in force.

Compensation and Benefits Ratio: A Key Metric for A Human Capital-Focused Industry

Compensation and benefits expense is the largest operating expense for an investment bank. The supplemental metric – compensation and benefits ratio, which is defined as compensation and benefits expense divided by revenue – is an important metric to investment banks as it measures banks’ ability to manage this significant expense. Investment banks typically try to manage their compensation and benefits expenses within a certain range. For the past three years, the compensation and benefits expense ratio has generally ranged from 62% to 64% at median.

64%62%63%0%25%50%75%100%202020212022Compensation & Benefts RatioInvestment Banks (n=11)

Investment Bank Executive Pay Mix

Investment Banks deliver a majority of compensation through variable incentives, with incentives split between cash bonuses and long-term incentives (LTI), as shown below. The average mix of variable incentives is approximately 26% current cash and 74% LTI for CEOs, and approximately 40% current cash and 60% deferred equity for other named executives. CFOs are an exception, receiving 55% in current cash and 45% in deferred equity, on average.

7%93%26%74%CEOFixed vs. Variable PayCash vs. LTIFixedVariableCashLTI40%60%Other NEOsCEOOther NEOs12%88%

Investment banks grant LTI for executives in the form of time-based restricted stock units, performance share units, or a combination of both. LTI can also be delivered as deferred cash. Performance-based plans for the CEO and NEOs are favored by shareholders and proxy advisors.

Equity Use

It is standard practice in the investment banking industry to deliver a portion of incentive compensation that exceeds a certain threshold in equity to promote retention and align employee interests with those of shareholders. Because investment banks have many highly paid employees, this practice results in investment banks granting more shares as a percentage of common shares outstanding than other financial services companies and companies in other industries. For the investment bank sample, median equity overhang exceeds Institutional Shareholder Services’ (ISS’s) threshold. The ISS threshold of 25% for Russell 3000 companies does not consider the unique industry factors that cause higher overhang for investment banks. (Note: ISS is one of the two major proxy advisory firms. ISS quantitative tests carry significant weight with publicly traded companies.)

To offset the dilutive impact that these additional equity grants have on shareholders, many investment banks have robust share repurchase programs. As a result, investment banks often focus on “net burn rate,” which crucially considers the impact of these share repurchase programs, rather than “gross burn rate,” when reviewing annual equity use.

34%0%10%20%30%40%Investment BanksEquity Overhang6.4%0.6%0.0%1.5%3.0%4.5%6.0%7.5%Investment Banks3 Year Average Burn RateGross Burn RateNet Burn RateISS Limit (Russell3000): 25%

Equity Overhang measures potential shareholder dilution, calculated as equity awards outstanding and shares available for grant under equity compensation plans divided by common stock outstanding.

Gross Burn Rate measures shareholder dilution from equity awards made in a particular fiscal year under equity compensation plans, divided by common stock outstanding.

Net Burn Rate measures shareholder dilution from equity awards made in a particular fiscal year, calculated as the difference of shares granted and forfeited or repurchased under equity compensation plans, divided by common stock outstanding.

Expectations for 2023 Performance and Compensation

Based on year-to-date performance among investment banks and analyst projections, median revenue for the group is expected to decrease again for 2023.

Publicly Traded Investment Banks: Financial Summary
(Median Projected Change from Prior Year)

FY 2023 Est.



Operating Income (EBT)


Operating Income (EBT) Margin

-3.8 pts

*Reflects analyst consensus estimates per S&P Capital IQ

Given the performance estimates and the historical relationship between revenue and compensation, CAP expects compensation granted for 2023 performance to be flat or down relative to 2022 following significant decreases in compensation for 2022.

For questions or more information, please contact:

Michael Bonner
[email protected]

Bonnie Schindler
[email protected]

Louisa Heywood
[email protected]

Thomas Brown
[email protected]

Investment Banking Pay Model

Compensation Decision-Making in Investment Banks

Investment banks approach executive compensation decisions differently than companies in general industry. While general industry practice is to target competitive pay in total and by component (i.e., base salary, annual bonus, long-term incentive), investment banks calibrate total pay to annual performance using “structured discretion.” Structured discretion considers firm performance, as well as unit and individual performance. Revenue is the key metric for company performance assessment.

Total PaySalary IncentivesCash BonusEquity / Def.Comp.Investment Banking Pay ModelTotal pay based on structured discretion that incorporates firm, unit and/or individual performance; incentive pay allocated to cash and equity and/or deferred compensation

About the Sample

Investment Banks

11 publicly traded, advisory-focused investment banks:

  • Evercore
  • Greenhill & Co.
  • Houlihan Lokey
  • Jefferies
  • Lazard
  • Moelis & Company
  • Perella Weinberg
  • Piper Sandler Companies
  • PJT Partners
  • Raymond James
  • Stifel