Wall Street Worst in Years, Bonus Checks on the Rise
December 22, 2007
(Long Island, N.Y.) Wall Street had its worst year in a decade but that didn’t effect bonus checks which rose 14 percent on average. You would have thought that the worst year in decades may have warrented no bonuses this year, but that just wasn’t the case at all.
Approximately 60 percent of the $49.6 billion in compensation the four biggest US investment banks will pay this year is for bonuses. That relates to approximately $30 billion in bonuses and that is only from Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Bear Stearns Cos., and Morgan Stanley.
Interesting enough, investors that held these banks’ stocks this year saw them spiral down by practically 45 percent. And, the stocks have not quit falling. Investors surely can’t be happy with losing on their stocks while bank executives rake in their portion of $30 billion in bonuses.
Some bank executives did chose to go without their bonuses since it was such a poor performance year. Two of these executives are CEO Jimmy Cayne of Bear Stears and CEO John Mack of Morgan Stanley.
Don’t worry, however, these executives won’t have to cut corners this Christmas because they declined their bonuses. Last year, Mack did not receive a cash bonus but he did receive another kind of bonus in the form of options and stocks. These were valued at $40.2 million. His base pay is $800,000. Cayne has a base pay of $250,000 and in 2006 he received a bonus of $33.6 million.
Some of the executives receiving bonuses this year include Lehman Brothers’ CEO Richard Fuld who will receive a stock bonus of $35 million, which is 4 percent higher than last year. CEO Lloyd Blankfein of Goldman Sacks will receive a bonus of close to $70 million since the bank did not experience large mortgage losses.
Many believed that had the mortgage crisis not occurred bonuses would have been much higher. But, since some executives skipped their bonuses and there were many layoffs the amount of bonuses for the year are lower than expected.
As for the rest of the traders and bankers who work on Wall Street nobody knows yet what their bonus checks will reflect. Over the coming weeks this will become clear, however, and most believe that underperformers will not receive much in the way of bonuses while the highest performers will receive excellent bonuses to stay in the business.