Twitter is taking the Wall Street brain drain to new level. On Tuesday, the microblogging site announced that Anthony Noto, a former high-ranking banker at Goldman Sachs, is to be its next finance chief. As enticement the company offered a sign on bonus worth more than $60 million. That's more than enough to price most of high finance out of the battle for talent.
Investment banks have long worried about being outbid by hedge funds and private equity. Mike Cavanagh's departure as co-head of JPMorgan's corporate and investment bank in March to become co-president at Carlyle is one of the latest examples.
It's not just pay that prompts people to leave banking. More regulation, lower profitability and increased public opprobrium against the industry make joining the shadow banking sector pretty appealing. Cavanagh, for example, looks set for total compensation that's just three-quarters of what he made at JPMorgan last year, according to a Breakingviews analysis. That includes a $2 million sign-on bonus. Over time, of course, he could end up earning much more.
Then Twitter pounced during his gardening leave. He knows the company well, having been one of the lead bankers on its initial public offering last year. But a $60 million welcome check is hard for even hedge funds to top.
It may also be that this part of the finance industry is maturing, judging by its underperformance compared with stocks for the past five years. Certainly, those lower down the totem pole aren't as interested in a finance career as was once the case.
In 2006, for example, 42 per cent of Harvard Business School graduates went into finance. Last year, that dropped to 27 percent. The subset choosing investment banking fell by 60 per cent. Meanwhile, those going into tech jumped from seven per cent to 18 per cent.
This could be a sign of a tech bubble - along with the $1 billion gain in market value Twitter enjoyed after hiring Noto. Until it abates, though, all of Wall Street looks like a target for Silicon Valley headhunters.
Investment banks have long worried about being outbid by hedge funds and private equity. Mike Cavanagh's departure as co-head of JPMorgan's corporate and investment bank in March to become co-president at Carlyle is one of the latest examples.
It's not just pay that prompts people to leave banking. More regulation, lower profitability and increased public opprobrium against the industry make joining the shadow banking sector pretty appealing. Cavanagh, for example, looks set for total compensation that's just three-quarters of what he made at JPMorgan last year, according to a Breakingviews analysis. That includes a $2 million sign-on bonus. Over time, of course, he could end up earning much more.
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Noto was all set to follow a similar path. He quit as Goldman's co-head of tech, media and telecom investment banking in May to move to hedge fund Coatue Management.
Then Twitter pounced during his gardening leave. He knows the company well, having been one of the lead bankers on its initial public offering last year. But a $60 million welcome check is hard for even hedge funds to top.
It may also be that this part of the finance industry is maturing, judging by its underperformance compared with stocks for the past five years. Certainly, those lower down the totem pole aren't as interested in a finance career as was once the case.
In 2006, for example, 42 per cent of Harvard Business School graduates went into finance. Last year, that dropped to 27 percent. The subset choosing investment banking fell by 60 per cent. Meanwhile, those going into tech jumped from seven per cent to 18 per cent.
This could be a sign of a tech bubble - along with the $1 billion gain in market value Twitter enjoyed after hiring Noto. Until it abates, though, all of Wall Street looks like a target for Silicon Valley headhunters.