Bad year? Bonuses on Wall Street surge 14%
NEW YORK -- This might have been one of Wall Street's most dismal years in a decade, but that hasn't stopped bonus checks from rising an average 14%.
Four of the biggest U.S. investment banks — Goldman Sachs Group, Morgan Stanley, Lehman Bros. and Bear Stearns — will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60%, or almost $30 billion.
That might not sit well with investors who held onto investment bank stocks this year — and watched them plunge up to 45%. Investment houses have been slammed by the credit crisis, and top executives this past week said they've yet to see a bottom.
Further, some of those executives have agreed to forgo their bonuses this year because of the poor performance. Morgan Stanley CEO John Mack and Bear Stearns CEO Jimmy Cayne won't be collecting their payouts.
Mack received no cash bonus a year ago but received stock and options worth an estimated $40.2 million, well above his $800,000 base pay. Cayne received a bonus of $33.6 million in 2006 and base pay of $250,000.
Goldman Sachs CEO Lloyd Blankfein reportedly is in line for a bonus of up to $70 million this year, as the nation's largest investment bank has navigated past large mortgage-related losses. Lehman Bros.' CEO Richard Fuld was granted a $35 million stock bonus for 2007, up 4% from last year.
There had been some predictions the increase in bonuses would have been significantly higher. However, layoffs and top managers giving up their bonuses have curtailed that.
For the army of bankers and traders on Wall Street, it remains to be seen what their bonus checks will offer when they're handed out the next several weeks. Top performers will still see some significant compensation as an incentive to not defect, while underperformers will suffer, executives at the banks say.
"If you were to normalize our business ... you would see we had a record year across the whole enterprise," said Morgan Stanley Chief Financial Officer Colm Kelleher.
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