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Wall Street Compensation To Diverge In 2009 – Study
While some investment and commercial banking firms will see year-over-year increases in compensation, bonuses for asset managers will decrease further off of 2008 lows, according to a projection from compensation consultancy Johnson Associates Inc.
The N.Y.-based firm expects banks "unencumbered by government funds" to have a greater ability to reward top talent, but forecasts retention challenges for those firms who received larger amounts of bailout money, resulting in public and political scrutiny.
Johnson Associates projects a "significant percentage increase" for senior level management, due to the ability of banks to repay the government for funds received from the Troubled Asset Relief Program. However, the firm expects significant variation based on specific company circumstances, with proxy executives' pay likely to remain depressed for TARP recipients.
Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) each received and later paid back $10 billion in TARP funds. Other banks, such as Citigroup Inc. (C), received $45 billion from TARP and have yet to repay the government.
Compensation has become a hot button issue, as many believe Wall Street prematurely rewarded firms for risky bets, contributing to the financial crisis. A recent report from N.Y. Attorney General Andrew Cuomo revealed several large banks paid hundreds of employees bonuses of at least $1 million last year.
Fixed income professionals could see the largest boost in incentive pay, with Johnson expecting a 40% to 50% increase due to a mix of products and strong performance in currencies and commodities.
However, within asset management, Johnson forecasts a 25% to 35% decline in bonuses, as markets are showing signs of recovery but remain significantly below 2008 levels.
Johnson also expects continued overhaul of pay practices as low base salaries are increasing to offset reduction in cash incentives, with more legislation creating additional challenges.
-Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com
(END) Dow Jones Newswires
08-11-09 1724ET
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