Morgan Stanley’s reported move to defer 100% of 2012 bonuses for high-earning employees is the crescendo of a trend of big banks deferring more pay in recent years. It’s the second straight year of big deferrals at Morgan Stanley, which a year ago held back 75% of bonuses for traders, investment bankers, and other high earners after having been at the 40% level the previous two years.
U.S. companies may be paying out big dividends before tax rates rise next year, but for now they’re holding the line with executive bonuses. “Politically it would be a disaster,” said Alan Johnson, CEO of Johnson Associates.
Wall Street bonuses are no longer plummeting, although the “new normal” emerging now is below the industry’s pre-recession heyday. “The revenues of these firms just aren’t good enough. There’s a pretty good alignment between pay and performance,” said Alan Johnson, managing director at consulting firm Johnson Associates Inc.
Wall Street workers, whose bonuses and year-end incentives fell by as much as 30% last year, will see slightly bigger bonuses and stock awards in 2012.
Wall Street employees, whose paychecks have often been cut in recent years, are likely to get a slight bump in their bonuses this year. The catch: the increase will come on top of one of the worst years for bank pay in recent memory.
Wall Street pay will bounce in 2012 from last year’s sharply reduced levels, but bonuses will be lower and have more strings attached than before the financial crisis, the latest tally of finance-industry compensation shows.
So-called incentive-based pay, which includes cash and stock awards, is set to climb 5% to 10% from a year earlier, according to a forecast set to be released Monday by consulting firm Johnson Associates. At the same time, financial firms are keeping a lid on cash outlays by deferring more pay and trimming their workforces.
“We are as low as we have been in 10 or 15 years,” said Alan Johnson, managing director of Johnson Associates, referring to Wall Street’s bonus pool. “It’s the new normal.”
Mr. Johnson said an equity trader who is managing director at a major firm could receive as much as 70% of his pay at a later date, an arrangement that ties more compensation to long-term performance.
Reflecting a big rebound from last year’s plunge, the survey said bond traders—among the hardest hit in terms of pay in 2011—could see their bonuses rise 10% to 20%, even though several firms are scaling back fixed-income trading operations.
J.P. Morgan Chase & Co.’s third-quarter results highlight a Wall Street juggling act: how to contain costs amid soft growth and volatile markets without losing highly paid, sought-after workers.
Almost half of Wall Street employees expect their year-end bonuses to be higher this year than they were a year ago, according to an eFinancialCareers.com survey.
On Wall Street, sometimes the bottom shapes the top. Consider J.P. Morgan Chase & Co. (US:JPM) . On Friday, reports surfaced that two more executives, Irene Tse, one of the executives in charge of trading and Barry Zubrow, the bank’s regulatory affairs chief, will step down in the wake of the “London whale” trading scandal. See report on Tse and Zubrow’s pending exit.
It’s a little hard to look at Wall Street without cringing these days. The nation’s richest financiers have been moping around midtown east like Eeyore, despondent about their stock prices, their return-on-equity figures, and the fact that the president won’t read their grandkids’ poetry manuscripts.