Manchester City’s bonuses beat those on Wall Street

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Investment bankers are different to footballers in many ways: they work longer hours, they cannot run as fast, and they have many fewer fans. But both operate in industries where stars are well rewarded and get bonuses for high performance and bringing in revenue.

That structure is working better for top players than many bankers at the moment, judging by two stories this week. Manchester City announced that its wage bill rose to £423mn last year, boosted by bonuses for wins in three UK and European football competitions. Wall Street bonuses, meanwhile, are expected to fall 25 per cent this year, amid a lull in dealmaking.

Investment bankers are still well paid: the average pay at New York City securities firms was nearly $500,000 last year. But Manchester City resembles a sports hedge fund by comparison. It has 520 employees, only 11 of whom are needed on a Premier League pitch at any time. They cost on average the equivalent of $1mn each in pay and benefits. 

Manchester City is no ordinary club: it has passed Real Madrid and Barcelona to become the highest-grossing team in Europe, with £713mn in revenues last year. It is controlled by Sheikh Mansour bin Zayed Al Nahyan of the United Arab Emirates, who has transformed it since 2008. I once lived by the club’s shabby old Maine Road stadium and it was nothing to today’s enterprise.

But it illustrates how sports franchises can be built by assembling and directing an array of expensive talent, including City’s Norwegian striker Erling Haaland. This is similar to financial firms, but less cyclical if done well. Indeed, Manchester City’s strategic focus and rigorous approach to team management reminds me of the former era of partnership at Goldman Sachs.

Wall Street has noticed. Michael Klein, a veteran dealmaker with links to Middle East investors, is forming an investment bank with Hollywood’s Creative Artists Agency. It hopes to capitalise on the interest among private equity and sovereign wealth funds in sports and entertainment. The US fund Silver Lake is a minority investor in Manchester City’s holding company.

The other difference between bankers and footballers is that the latter perform in public. This goes to the heart of an old debate about the “superstar effect”: the capacity of a few talented individuals to be paid extraordinary sums due to technology and globalisation. The larger the market that any individual can reach, the greater his or her potential to become wealthy.

One school holds that it is mainly a question of talent or professional position: if you are a top banker or lawyer, you can extend your franchise to many more potential clients now. Klein is an example of this, having learnt to travel the world in search of investors to connect with deals. Not many people need to have heard of him for it to be extremely rewarding.

The other view is that what matters is performance: the most important quality is the ability to draw a crowd, make people watch you on television or attract millions of followers. Fame is the thing, even if you establish it in the first place by being talented. Thus, Lionel Messi has brought celebrity to Major League Soccer by joining Inter Miami from Paris Saint-Germain, and has been very highly compensated.

Manchester City knows the financial worth of fielding famous players. Building a team that can, as its annual report puts it, “excite, entertain and win silverware” allows it to multiply many times the 53,000 fans who can cram into each home game. It attracted an aggregate television audience of 786mn last year, and 1.5bn social media engagements: that is the superstar effect behind its growing brand value.

The challenge is keeping the talent in line, as Wall Street has experienced over the years. On pure financial metrics, Manchester City is more star-driven than many investment banks with its wage bill consuming 59 per cent of revenues last year. It is helped by being able to trade valuable players as assets, which banks would envy: the net £122mn that it made in the transfer market last year helped to put it into profit.

Wall Street’s depressed bonuses will bounce back from the cyclical doldrums. They also belie its own star system. David Solomon, Goldman chief executive, said last month that “the market for top talent remains fiercely competitive”. The fortunes that used to be made on investment bank trading floors are now being built out of sight in private equity, or at multi-strategy hedge funds.

But there is a wider lesson: the superstar effect is expanding in sports, entertainment and marketing. Wall Street used to be an outlier in the way it paid its stars but now looks more ordinary. The highest bonuses once went to those who were closest to financial markets but celebrity status is an equally good — if not better — way to capture outsized rewards.

“Become a Premier League footballer” is not practical career advice for most people: it is hard enough to become an investment banker. Still, if you happen to have the choice of superstar roles, pick fame.

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