Wall Street paid an average cash bonus of $128,530 last year — down nine percent from the previous year as financial reforms prompted a shift towards deferred compensation and higher base salaries, according to a report released today.
Outrage over the federal government’s bailout of banks and brokerages and fears that Wall Street’s way of paying its employees encouraged too much risk-taking drove the companies into trying to spread these often rich awards out over more years and pay more of them in stock.
The report issued by State Comptroller Tom DiNapoli shows the decline in cash bonuses is a result of changes made by the industry in response to reforms, including a shift toward deferred compensation, stock options and higher base salaries.
“Cash bonuses are down, but that’s not an indicator of a weakness on Wall Street,” DiNapoli said. “Wall Street is changing its compensation practices in response to regulatory reforms adopted in the aftermath of the greatest financial meltdown since the Great Depression. Past practices rewarded short-term gains at the expense of long-term profitability.”
The report found that while the size of the cash bonus pool declined, overall compensation has grown and that overall compensation was higher by six percent in 2010.
Wall Street profits totaled $27.6 billion in 2010, which would be second only to 2009 when the industry benefited from government bailouts and declining interest rates.
The report also shows:
— The profits of the broker/dealer operations of New York Stock Exchange member firms, the traditional measure of Wall Street profitability, totaled $27.6 billion in 2010, making it the second most profitable year on record after the $61.4 billion record set in 2009.
— Before the start of the financial crisis, income tax collections from Wall Street-related activities accounted for as much as 20 percent of New York State’s tax revenues. The contribution declined to 13 percent this year.
— Wages paid to workers in the securities industry in New York City during the first half of 2010 were 21.9 percent higher compared to the prior year.
— The securities industry in New York lost nearly 31,000 jobs during the recession, a 16 percent decline.
With Reuters