The office of New York State’s Comptroller, Tom DiNapoli, just put out its annual review of the state of Wall Street bonuses, and let’s put it this way, the results need serious unpacking.
In New York City, securities industry bonuses are forecasted to rise 8% to $20 billion, according to the report. This is better than DiNapoli’s office projected in October, but it in no way tells the whole story of what’s going on with compensation.
There are a couple of factors as work here. First off, this number doesn’t reflect how much of what is being paid out in 2012 is part of deferred compensation from other years.
Since the financial crisis, more banks have been deferring compensation for up to three years in order to better tie banker pay with performance.
Morgan Stanley, for one, announced that 100% of this year’s compensation for “top earners” would be deferred for three years. “Top earner,” in this case, means anyone making more than $350,000 with a bonus of more than $50,000.
Then there’s the fact that some banks paid out bonuses earlier than they’d planned to.
“In response to the fiscal cliff, a larger share of bonuses were paid in December 2012 to avoid higher federal tax rates scheduled to take effect in 2013,” said the report.
So we’ll see how that impacts 2013’s numbers.
The average cash bonus rose by an estimated 9 per cent to almost $121,900 per person, but that’s because the entire pool is being shared between fewer people.
The Comptroller estimates that the securities industry in New York City lost 28,300 jobs during the financial crisis and has added only 8,500 so far during the recovery, a net loss of 19,800 jobs.
Employment totaled 169,700 jobs as of December 2012 — 1,000 fewer jobs than one year earlier. DiNapoli believes the industry will continue to restructure and downsize until a new business paradigm is established.
“Restructure” and “downsize” are words the Street has become all too familiar with, and everyone knows they don’t bode well for compensation.