Past Year's Bonus Pool Within NY City Pegged At $20.3 Billion, Up 17 Percent
Total bonuses paid to securities industry employees in New York City for 2009 climbed 17 percent from 2008 but remained far below levels of 2005 through 2007, a state government report found. However, restrained bonuses were accompanied by large salary hikes in many cases, along with changes in payment structure that cloud the comparison.
The industry-wide bonus payout to New York-based Wall Street employees rose to $20.3 billion from $17.4 billion in 2008, according Tuesday's report by New York State Comptroller Thomas P. DiNapoli. By comparison, the New York bonus pool ranged between $25 billion - $35 billion for the years 2005-2007.
Total compensation at the largest firms grew at a faster pace last year, rising 31 percent overall and 27 percent per head compared with 2008. That figure covers Goldman Sachs, Morgan Stanley, and JPMorgan Chase Investment Bank, whose combined total pay per employee averaged $340,000. Figures for the securities operations at Citibank and Bank of America aren't available, the comptroller said.
Upstaged By Banks' Actions and Data Releases
DiNapoli's report is the latest annual installment of what used to be a widely awaited and widely cited analysis. This year it's a bit of an anticlimax - upstaged by the headline-grabbing compensation and bonus numbers released by various bulge-bracket banks during January. The largest institutions based in the U.S. and Europe slashed company-wide compensation and benefits expense in the fourth quarter, doled out smaller-than-expected bonuses to some top executives (and paid those executives entirely in deferred stock), and recast bonuses to much of the rank-and-file into combinations of cash and deferred stock. What's more, several banks released specific numbers for their year-end bonus pools - something they had never done before. Those actual payout totals reported by banks displaced the DiNapoli report's presumed role as the closest thing to an objective source of estimates on Wall Street bonuses.
Broker-dealer operations of New York Stock Exchange member firms earned a record $49.9 billion through the first three quarters of 2009. DiNapoli forecasts that profits could exceed $55 billion in 2009, nearly three times greater than the previous record. In 2008, the industry lost a record $42.6 billion.
The comptroller's estimate is based on tax collections and reflects cash bonus payments and deferred compensation for which taxes have been prepaid. It does not include stock options that have not yet been realized or other forms of deferred compensation.
The report adds:
Estimating the size of the bonus pool was made more difficult this year by unprecedented changes in compensation practices. Many financial firms delayed payments and paid a greater share in stock or other forms of deferred compensation. The industry also paid higher base salaries, deferred cash payments, and implemented clawback provisions, which will enable firms to recoup bonuses for excessive risk-taking. The industry also devoted a much lower share of net revenue to compensation compared with past years.