Think Wall Street is the land of plenty when it comes to compensation? Think again. If 2011 pay to top executives is a window into the Wall Street compensation machine, then compared with other industries — the entertainment media, for instance — the bloom is definitely off the rose.
In 2011, the best-paid Wall Street chief executive officer was Jamie Dimon at JPMorgan Chase. He got $23 million in total compensation. John Stumpf of Wells Fargo got $17.9 million, while Lloyd Blankfein at Goldman Sachs had to settle for $16.2 million. Vikram Pandit at Citigroup received $14.9 million, but 55 percent of Citigroup’s shareholders voted for a nonbinding resolution that would’ve denied him that pay. James Gorman at Morgan Stanley took home $10.5 million, a pay cut of 25 percent from the year before. Brian Moynihan at Bank of America got $8.1 million.
I understand that this is a great deal of money. And that it remains true that Wall Street firms pay out a larger percentage of their annual revenue as compensation to employees than any other industry where companies are publicly traded — generally between 40 percent and 50 percent (although Lazard Ltd. has been averaging a payout ratio of 63 percent of revenue for the last two years).
Yet there is a clear pattern: Absolute Wall Street pay, in relation to some other fields, has been coming down in recent years.
There are good reasons for this, of course. Generally, profits have been down, return on equity is down, revenue growth is down, stock prices are down and regulation is up. And the prospects for finding ways out of this conundrum are minimal.
While few tears will be shed for Wall Street’s executives, or for anyone else fortunate enough to work there, these trends may bring a sea change at the big banks.
For more than a generation, Wall Street has been able to recruit the world’s best and brightest mostly by promising them more money than they can possibly make elsewhere. But when that promise can no longer be kept, or when paychecks are smaller than expected, the best and the brightest begin voting with their feet.
Where do they go? Well, if they follow the money, then there should be a stampede back into professions such as the media industry, where top executives quietly hauled a fortune in 2011 compensation.
For instance, Les Moonves, the CEO of CBS, was paid $69.9 million in 2011. David Zaslav of Discovery Communications received $52.4 million, while Philippe Dauman at Viacom was paid $43 million. Walt Disney’s Robert Iger got $31 million. Jeff Bewkes, at Time Warner, was paid $26 million in 2011.
Six media executives wound up in the top 15 of the Associated Press’s list of highest-paid executives released last week; not a single banker joined them. No doubt these talented executives are worth every penny of their exorbitant pay: Profits at their companies are up, as are stock prices. But one would be hard-pressed to remember the last time that the top pay at media companies outstripped that of Wall Street.
This apparent paradigm shift occurs infrequently, and could well signal the beginning of a new era — the first in generations — when the pay potential is no longer highest on Wall Street.
When you combine that with just how miserable it is to work at one of those banks on a day-to-day basis, there may be value for the leaders of Wall Street to rethink not only their business models but also what they’ll need to do to continue to attract the best and the brightest when offering the highest pay is no longer an option.
William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. © 2012, Bloomberg News.