Lavish investment bank pay has been challenged after the collapse of financial markets last year forced the US and other governments to bail out banks and brokerages. As a deepening recession weighs on taxpayers, out-sized bonuses are difficult to defend. That will force banks, who still want to retain and recruit the best, to boost salaries. Johnson made his comments in a presentation to the Wall Street Compensation and Benefits Association last week.

An executive who received $250,000 in salary, for example, may now get paid as much as $600,000 a year. In years past, the vast bulk of annual pay came from the year-end bonus.

But bonuses, on average, may fall 20 percent this year, reflecting political pressures and continued weakness in financial markets, said Johnson, who advises top investment firms.

Asset management staffers could see an even steeper decline of 40 per cent as falling markets and redemptions sap revenue.

Job cuts also will continue, with headcount being slashed by another 15 per cent to 20 per cent this year, he predicted.

Johnson says he advises banks to take a hard look at how they structure bonuses, such as introducing risk provisions and clawback provisions. Under a clawback, a company could recoup compensation as a result of an employee's wrongdoing.