Bonuses Reflect a Very Good Year
It's eye-catching enough to see that Wall Street's bonuses will total some $23.9 billion this year - a 17 percent increase from 2005. But think of this: The bonus pool is more than 1,000 percent larger than it was in 1986.
The New York State Comptroller's office says Wall Street bonuses will total $23.9 billion this year, surpassing last year's record of $20.5 billion by 17 percent. By the calculations of the New York Daily News, that's 1,100 percent the amount of bonuses paid out in 1986.
That's worth saying that again: 1,100 percent the amount of bonuses paid in 1986.
The surge is led by the $54 million Goldman Sachs awarded its chairman and chief executive, Lloyd Blankfein. Earlier this week, Morgan Stanley said it paid CEO John Mack $41 million.
Though the numbers are huge, many along Wall Street seem to take them in stride. Michael Kelly, a recruiter in New York, told Bloomberg that the city "is the financial capital of the world, so the numbers are naturally staggering," and added, "The bankers in New York City are the best paid when compared to other financial centers."
The securities industry employed an average 177,300 people from January through October of 2006, New York Comptroller Alan Hevesi estimates. So, the average bonus will be $137,580.
Alan Johnson, a noted compensation consultant on Wall Street, had predicted "eye-popping" bonuses earlier this year, citing the extraordinay performance of many investment banks. And, indeed, the banks have been reporting strong results. Some of the largest firms had their best year ever, Hevesi notes, which translated into record year-end bonuses.
Hevesi's forecast reflects not only the strength of traditional Wall Street activities, but also its expansion into global markets and an increased demand for services such as hedge funds. It doesn't include stock options that have not yet been exercised, which could increase the value of bonuses by billions of dollars.