A recent eFinancialCareers survey of bonus expectations among some 1,400 employed Wall Street professionals reveals an almost equal division among three groups: those who expect a bonus larger than last year's, smaller than last year's, and no bonus at all.
The finding that 36 percent expect a higher bonus this year is raising eyebrows across a broad swath of the world's news media, in view of the ongoing global financial sector meltdown and very public calls by prominent U.S. lawmakers for banks to curtail bonus payments.
However, many who anticipate a hefty year-end payout are likely to be disappointed, an investment banking headhunter tells eFinancialCareers News.
"One-third of the world is not going to get more than they got last year," says Richard Lipstein, managing director at Boyden Global Executive Search in New York. "If people think that, it's a combination of human nature and the Lake Wobegon effect," he said - a reference to the mythical town in Garrison Keillor's "Prairie Home Companion," where "all children are above average."
10 Percent Anticipate Dramatically Larger Bonus
In the eFC survey, administered online from Oct. 13 through Oct. 21, 34 percent of respondents said they expect no bonus for this year, and another 30 percent said they expect a bonus smaller than last year. The remaining 36 percent who expect a larger bonus broke down into 20 percent eyeing a single-digit increase over 2007, 10 percent who expect to receive at least 33 percent more than in 2007, and 6 percent who foresee a double-digit gain of up to 33 percent. Some 71 percent of front-office workers expect a bonus this year, compared with 56 percent of those in back-office jobs. Only respondents who said they are currently employed were counted in the results.
Anecdotal evidence from many sources indicates 2008 bonuses on the whole will shrink by 40 percent or more from last year's levels. Still, although the amounts may pale in comparison with Wall Street's boom years earlier this decade, it remains likely that a majority of financial markets professionals will see something in their envelope.
Congressmen Demand Blood
That prospect is generating an angry buzz among politicians. However, railing against bonuses in general ignores important distinctions between C-suite executives and hard-working pros in the trenches, and between banking and most other industries whose employees work primarily for fixed salaries rather than highly variable salary-plus-bonus packages.
For instance, House Financial Services Committee Chairman Barney Frank (D-Mass.) last week urged "a moratorium on bonuses...for all firms'' - not just for those getting emergency aid from the Treasury under the financial-rescue program. And this week Rep. Henry A. Waxman (D-Calif.) sent nine banks that received taxpayer funds a letter that read in part, "I question the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses..." Waxman is chairman of the House Committee on Oversight and Government Reform.
Top Performers Will Get Paid
The eFC survey results underscore that even while vanishing profits deplete bonus pools, "bonuses will still be paid to those individuals who generated revenue for their institutions," observed John Benson, founder and CEO of eFinancialCareers.com. "For those who performed, the failure to receive a bonus will most likely push them to look for a new employer and banks cannot afford to lose their top performers right now."
Lipstein agrees. "Those that have performed will be paid the preponderance of the available moneys," he says.