Bonus Changes Won't Affect Risk: Survey

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Are financial institutions modifying their bonus policies in a way that will help control risk-taking? Not likely, according to recent survey of more than 1,000 eFinancialCareers users.

A slight majority said their employers have revised bonus policies. But 60 percent of respondents who take risk as part of their jobs said the employer's current policies won't affect their risk-taking. And 12 percent even said current policies incline them to take greater risks. Just 28 percent view their employer's bonus policy as promoting restraint.

Most Don't Expect Bonus to Recoup

Another surprising survey finding: A clear majority of employed financial professionals who responded to the survey, expect no rebound in their bonus this year, compared with the amount they received for 2008.

That's at odds with recent headlines - many derived from compensation and benefit expenses disclosed by the major investment banks in second-quarter earnings reports - that point to double-digit average percentage growth for this year's bank bonus pools. (To be sure, the bonus outlook for buy-side institutions is less cheery than for the sell side.)

In the eFC survey conducted online from Sept. 15 - 29, 83 percent of respondents said they expect to receive a bonus this year. While the mainstream media are likely to harp on that number, the great majority of financial market professionals are eligible for bonuses every year.

The more meaningful figures are the proportions that expect their 2009 bonus to be greater than, equal to, and less than, amounts they received last year.

Only 30 Percent See Double-Digit Bonus Gain

Among respondents who anticipate a bonus, 31 percent expect a smaller payout than last year. Another 25 percent expect the same payout as last year, and 43 percent expect a larger amount. Many in the latter group expect an increase in the 0 - 10 percent range. Just 30 percent of all respondents who anticipate a bonus expect it to rise at least 11 percent compared with 2008.

When eFC conducted the same survey a year ago, the identical proportion of the entire sample - 36 percent - expected a larger bonus than they'd received the year before. That result signified Wall Street pros were over-optimistic, and many perhaps had a sense of entitlement.

However, much has changed in the intervening 12 months. A year ago this time, Wall Street was hemorrhaging red ink. And in year-earlier comparisons, 2008 bottom-line results and bonus accruals were being measured against 2007 - a year of near-record prosperity. As a result, the combined bonus pool for Wall Street firms shrank 44 percent for 2008 versus 2007, according to a report by New York State Comptroller Thomas DiNapoli.

Now that the biggest banks' results are rebounding, surveys published elsewhere indicate bonuses are poised to rebound too. So the year-to-year comparisons revealed by the new eFC survey appear conservative indeed.

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