Wall Street pay rises to record levels
Total compensation and benefits for publicly traded Wall Street banks and securities firms hit a record of $135 billion in 2010, a 5.7 percent increase over 2009, reports the Wall Street Journal. While more salary is deferred than before, the increase in base Wall Street pay more than compensates.
Wall Street salaries a ‘Get Out of the Recession Free’ card
The Wall Street Journal’s survey of 25 large financial firms that posted full-year results reflected a significant revenue rebound. Overall, revenue reached a record $417 billion. That 1 percent increase is a sign that things are getting back on track for the recipients of taxpayer-funded bank bailouts.
“Things are shifting back to where they were before,” said corporate law professor J. Robert Brown of the University of Denver.
But not everything will be the same. Federal regulation and pressure from shareholders have changed the culture of the Wall Street pay. Criticism over large Wall Street bonuses was impossible to ignore. In 2009, one-third of Wall Street salaries were delivered in manner that allowed them to be deferred. However, as New York pay consultant Alan Johnson of Johnson Associates Inc. estimates, half of Wall Street salaries were deferred in 2010.
Wall Street revenue drives record salaries
Wall Street pay is driven by what is known as the compensation ratio, the percentage of total revenue that Wall Street directs to employees. The average Wall Street salary was up by 3 percent (to $141,000), and the compensation ratio reached 32.5 percent last year. Deferred or no, those are hard numbers for the average U.S. taxpayer to swallow, considering that salaries off Wall Street have stagnated and consumers are looking to short term credit like installment loans to make up for deficiencies in pay.
Runs on hiring Wall Street executives have also contributed to the higher overall salary level. Investment bank Greenhill & Co. increased salary by 16 percent to $159.9 million after a three-year hiring binge. This occurred despite a less than impressive fourth quarter last year. Meanwhile, top executives such as Bank of America’s Brian Moynihan and Goldman Sachs’ Lloyd Blankfein received huge raises. Moynihan’s 2010 salary was 67 percent higher than the previous year, while Blankfein tripled his salary and received a stock-based raise of 40 percent.