US banks to pay out record bonuses
Tuesday November 10 2009
Goldman Sachs Group, Morgan Stanley and JPMorgan Chase's investment bank, survivors of the worst financial crisis since the Great Depression, are set to pay record bonuses this year.
The firms -- the three biggest banks to exit the US government's Troubled Asset Relief Programme -- will hand out $29.7bn (€19.8bn) in bonuses, according to analysts' estimates.
That's up 60pc from last year and more than the previous high of $26.8bn in 2007. The money, split among 119,000 employees, equals $250,400 each, almost five times the $50,303 median household income in the US last year.
The three banks will award more in stock and defer more cash payments amid pressure from regulators to tie pay to long-term results, compensation experts said.
They may still face public wrath over the size of bonuses after the government injected capital into all the major financial institutions following the collapse of Lehman Brothers in September 2008.
"Wall Street is beginning to resemble Clark Gable as Rhett Butler in the film 'Gone With the Wind': 'Quite frankly, my dear, I don't give a damn'," Paul Hodgson, a senior research associate on compensation at the Portland, Maine-based Corporate Library, said.
"It doesn't seem as if even political threat, disastrous PR, envy, rising unemployment rates and home repossessions is enough to get any of these people to refuse the bonuses they have 'earned'."
Bonuses for employees in fixed income will likely jump the most -- 40pc to 45pc -- while employees in asset management may see no growth in their year-end bonuses, according to a report from Options Group, a New York-based executive search and compensation consultant firm.
Average bonuses for employees at financial firms worldwide will rise about 3pc to 40pc this year, according to the annual report, which is set to be released this week.
They will still remain below 2007 levels after dropping an average of 40pc to 45pc last year, the report said.
Managing directors in high-yield credit sales are expected to see some of the largest average increases in bonuses, a 50pc jump to a range of $1.3m to $1.7m.
Morgan Stanley is among banks that are offering a larger portion of bonuses in stock and instituting so-called clawback clauses to tie incentive pay to risk, the report said. JPMorgan and UBS are also raising base salaries for some employees to reduce the share of bonuses in total pay. (Bloomberg)
Irish Independent
