Wall Street is getting stingier with bonuses.
The average bonus tumbled by 9 percent to $146,200 last year, according to data released by the New York State Comptroller’s Office Monday. Bonuses are still much bigger than they were during the financial crisis, but smaller than they were 10 years ago. (The all-time high averaged $191,360 in 2006.)
The decline follows a pretty dismal year for a financial sector that isn’t expected to get much better in 2016. Industry profits fell by 10.5 percent, according to the comptroller’s report. And bank stocks have performed worse than the rest of the market all year. (Shares of Bank of America are down nearly 20 percent so far this year.)
“Both the state and city budgets depend heavily on the securities industry and lower profits could mean fewer industry jobs and less tax revenue,” New York State Comptroller Thomas P. DiNapoli said in a statement. State officials had forecast the overall bonus pool for the current fiscal year to grow modestly by 0.7 percent, but now expect it to decline about 2.5 percent.
While the average bonus size declined last year, the payouts were still strong in some areas, including among hedge funds or those consulting on mergers and acquisitions, compensation experts say. “There are many million dollar bonuses, just a lot fewer than there used to be,” said Alan Johnson, managing director of pay consultant Johnson Associates.
Also, the average salary is still strong. The average Wall Street salary, including bonuses, rose 14 percent to $404,800 in 2014, the most recent year available, according to the state comptroller’s office.
But the changes in pay come as Wall Street grows increasingly worried that the global economic downturn will erode the industry’s bottom line for some time. “We were all too optimistic for the last four or five years that the global economy would get better,” Johnson said.”
Morgan Stanley, which has seen its shares tumble 18 percent this year, has already cut more than 1,000 jobs in its fixed income business, for instance.
The dip in average bonuses is unlikely to alleviate pressure on regulators to rein in Wall Street pay. In 2010’s financial reform package, known as the Dodd-Frank Act, lawmakers called for regulators to curb compensation considered excessive or pay that exposed a company to significant financial losses. But progress on the rules has been slow.
In the meantime, many firms have already moved to paying out bonuses in stock rather than cash and including more “clawback” provisions that make it easier to recoup bonuses in certain situations, such as when a trader’s financial bet sours.
“New York’s declining Wall Street bonus pay shows movement in the direction of sanity, but there are still one too many zeros,” said Bart Naylor, a financial policy advocate for Public Citizen.
Wall Street bonuses fell 9% last year
Every year the New York State Comptroller reviews Wall Street bonuses and the industry's profitability. This year, the agency found that both had declined.
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