Wall Street Payouts Decline, New Norm?
With the season of bonuses and pay raises coming to an end,a clearer picture of recent Wall Street payouts has come to light. Morgan Stanley (NYSE:MS), Credit Suisse Group AG (NYSE:CS) and Citigroup Inc. (NYSE:C) incurred some of the biggest pay cuts for it employees, averaging as high a 30 percent, thanks to declining revenues.
This time around, bonuses and payouts are varying. According to Bloomberg, Morgan Stanley, the world’ largest broker, will limit cash bonuses and delay additional payouts while a portion of bonuses in bonds backed by derivatives by Credit Suisse (NYSE:CS) will take place; Citigroup could cut bonuses as high as 70 percent in certain areas such as it securities and banking unit.
By containing the payouts and limiting expenses Wall Street firms may also give out more in stock bonuses than cash due to declining revenues. This isn’t necessarily a bad thing for workers.
Paul Sorbera, president of Wall Street executive search firm Alliance Consulting explained.He said, “If things turn around, it may really turn out to be a windfall for them. Some of these stocks are off 80 percent.”
This could work well for Bank of America Corp. (NYSE:BAC) personnel. With the S&P Financials Index up 8.6 percent so far this year, the bank is second in the U.S.with its assets and is leading the Dow Jones Industrial Average with its 31 percent gain. But 2010 wasn’t a great one and employees will see this reflected in their bonuses.
The bank will cut compensation on average 25 percent, top bonuses out at $150,000 and freeze some salaries. Goldman Sachs Group Inc. (NYSE:GS) also cut its discretionary compensation “significantly more” than its 26 percent revenue decline.
These lower Wall Street payouts may not end anytime soon and workers may need to see it as a possible new norm. In remarks from January 25, Morgan Stanley Chief Executive Officer James Gorman said the “world has changed,” and that bankers have to accept lower pay.
He added, “If you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. If you’re really unhappy, just leave. I mean, life’s too short.”