Over the last two years, Wall Street financiers were able to rake in more than $60 billion in bonuses, much of it in cash. Lehman Brothers (LEHMQ.PK) alone disbursed nearly $6 billion in bonuses in fiscal ’07 before recently filing for bankruptcy and becoming one of the largest casualties of the global credit crisis. Bear Stearns (BSC), Goldman Sachs (GS), Merrill Lynch (MER), and Morgan Stanley (MS) paid a record $33 billion in bonuses to themselves as well in fiscal ’07.
Actual bonuses vary by individual and by firm, ranging from hundreds of dollars for clerical and support staff to tens of millions of dollars for high performers and key executives. What’s interesting, (ABC has the numbers) is that those 2007 bonuses given by these firms, were paid even though their shareholders last year collectively lost more than $70 billion in stock declines – their worst performance since ’02.
According to an estimate released earlier this year by NY State Comptroller Thomas P. DiNapoli, average Wall Street bonuses in ’07 declined only 4.7% from record levels in the prior year to $180,420 — even though the credit crunch and market turmoil battered profits. The bonus pool paid by the securities industry to its employees and execs. in New York City totaled $33.2 billion, 2% less than the record $33.9 billion in 2006.
Another interesting aspect is that compensation contracts in most cases doesn’t require executives to return already-paid bonuses, even if the decisions made while collecting these payments put the firm out of business.
The drop in Wall Street’s bonuses for 2008, notes Reuters – could rival the 50% fall seen in 2003. Bonuses this year will certainly be dramatically lower for workers in mortgage-related businesses. According to a recent projection from compensation consultancy firm Johnson Associates – some bankers’ bonuses will be slashed by nearly half in 2008, and most can expect a 15% to 25% reduction from last year’s levels. Johnson Associates expects the top executives to give up the most, with bonuses of senior firm managers at investment banks tumbling 35% to 45% from 2007 levels.