Managing Director 2025 Compensation: Market Debrief

1. Macro Context & 2025 Bonus Performance

After a volatile start to 2025 characterized by tariff uncertainty, the year concluded with a significant recovery in deal flow and trading activity.

• Total Industry Bonus Pool: Forecasted to reach $49.7 billion, an 8% increase over 2024 (NYC Comptroller).

• Average Industry Bonus: Approximately $247,000 per securities industry employee in New York City.

• Top Performing Sectors:

  • Equities Sales & Trading: Saw the largest jumps, with increases of 15% to 25% 

  • Advisory/M&A: Rebounded strongly in H2, finishing up 10% to 15% 

  • Fixed Income: Underperformed relatively, with some credit desks facing declines of ~6%.

2. Managing Director Compensation Structures

Total compensation for MDs remains highly bifurcated based on firm type and individual revenue generation.

Total Compensation Benchmarks

The MD "Pay Split" (Cash vs. Stock)

The 2025 cycle reinforced the trend of "deferred liquidity," where a majority of senior pay is non-cash.

• Cash Component: MDs typically receive less than 50% of their total bonus in immediate cash (eFinancialCareers).

• Stock/Deferred Component: Now routinely exceeds 50% of total incentive.

3. Structural Shifts & New Regulatory Hurdles

Retention strategies are being redesigned to comply with landmark legislation in California and New York.

CA AB 692 (Effective Jan 1, 2026)

California's new "Stay-or-Pay" law restricts the ability to claw back costs from departing employees (Akin Gump).

• Strict Proration: Any sign-on or retention bonus repayment must be prorated over a period of no more than two years.

• Stand-alone Agreements: Repayment provisions must be in a document separate from the primary employment contract.

• Right to Counsel: Employees must be given 5 business days to review and consult an attorney.

• No Interest: Repayment amounts cannot accrue interest.

NY Trapped at Work Act (TAWA) (Effective Dec 19, 2026)

New York amended its "Stay-or-Pay" rules to clarify exceptions for financial professionals (Littler).

• Delayed Effective Date: Operative provisions are now delayed until December 19, 2026.

• Bonus Safe Harbor: Explicitly allows for the repayment of sign-on bonuses and relocation assistance, provided they are not tied to job performance.

• Misconduct Trigger: Repayments generally cannot be enforced unless the employee resigns voluntarily or is terminated for misconduct.

• No Acceleration: Prevents firms from requiring immediate, accelerated repayment of a prorated debt upon departure.

4. Retention & Risk Provisions

• Performance Stock Units (PSUs): Increasing use of "performance-vesting" (tied to firm ROE or TSR) rather than just "time-vesting."

• Clawback Duration: Scope is expanding to cover reputational harm and excessive risk-taking, with windows now reaching 5 to 7 years at major institutions (eFinancialCareers).

• Garden Leave: Standardizing at 90 days for Directors and MDs, acting as a secondary barrier to immediate lateral movement 

Sources

• NYC Comptroller: 2025 Bonus Forecast

• Littler: NY Trapped at Work Act Amendments

• Akin Gump: CA AB 692 "Stay-or-Pay" Restrictions

• Johnson Associates via AI-CIO: Wall Street Bonus Increases

• eFinancialCareers: 2026 Bonus Round Trends