The Mystery of Wall Street Pay
As many Wall Street employees await their coveted annual bonuses this month, main street doesn’t have any idea how they are either determined or what they payout. They are known to carry large sums and the topic is often subject to a lot of gossip.
Bonuses have been rumored to come in higher than the average median wage and for many lucky Wall Street employees, they will buy a new home or use it to say “I quit” and go to a competitor for even more money.
Throughout this month, the media had had a field day reporting on this arcane subject. Bloomberg reported junior investment bankers were not going to have an guaranteed salary increases in 2012 while the New York Times wrote that pay is serious business for this group and executive compensation experts may charge $11,000 for an annual report which helps banks determine how much to pay their top traders.
In a second New York Times article Andrew Ross Sorkin noted Wall Street pay will …
come in higher this year when compared to revenue.
So just what are these numbers? Average pay per employee is one figure that does get discussed and according to the Wall Street Journal, Goldman Sach’s (NYSE:GS) average pay was $367,057 in 2011. The bank is said to have the highest payout to its bankers and traders as it put $12.2 billion aside for compensation and benefits for the year but it saw was a 21 percent decline from the $15.4 billion put aside in the previous year as 2010 Goldman employees had an average pay of $430,700.
But keep in mind this salary figure will vary. Firms will compensate top revenue-generating employees a lot more and differently than the admin staff.
Some sampling of the largess can be seen with Citigroup’s (NYSE:C) former trader Andrew Hall. In 2007, Hall’s Phibro unit brought in 10 percent of the bank’s net income and the trader asked for a $100 million payday. There’s also American International Group’s (NYSE:AIG) Joseph Cassano, who had a $44 million payday.
As long as investment banks aren’t required to disclose what they pay their high earners, the mystery of Wall Street pay will continue. It’s usually good to error on the side of thinking pay is going to be too high than too low.