End-of-the-year compensation on Wall Street could hits its lowest levels since the financial crisis in 2008 when companies start doling out annual bonuses at the end of this week. "Companies definitely have to realize the party as they know it is over," explained an analyst. Another said, "Obviously this is not a good year for Wall Street compensation and an awful lot of the pressure is going to fall on managing directors," while one warned, "We do not expect a robust recovery in 2012." All of the doomsday forecasting goes along with estimates of a 27 to 30 percent fall in compensation overall, with employees at Goldman Sachs and Morgan Stanley possibly seeing their pay for the year halved.
Based on money set aside for bonuses earlier in 2011, The Wall Street Journal estimates slimmer wallets even for the typical winners:
At Goldman, average compensation per employee would fall 10.7% to $385,000 for 2011 from $431,000 in 2010 if the New York company keeps its payout rate steady in the fourth quarter. In 2007, Goldman employees received an average of $661,000 each, and people throughout the firm are bracing for disappointment.
Analysts who follow Goldman expect the securities firm's revenue to fall 23% for 2011 compared with 2010, according to a survey by FactSet Research Systems.
For the typical Goldman partner, pay for 2011, including base salary and bonus, is likely to range from $3 million to $6.5m, according to people familiar with the matter. In better years, payouts have been at least twice as high, these people said.
The smaller numbers are owed to "lower trading revenue, languid deal-making, new regulations and anxiety about the global economy," and come amid layoffs industry-wide. JPMorgan Chase will report its earnings Friday, and Goldman and others will follow next week.
We'll give the last word to an ex-Lehman Brothers banker as quoted in New York's "Workplace Confidential" issue:
It’s just a grind now. I don’t get the whole Occupy Wall Street thing. Nobody is making that much money, and no one is having that much fun, so what are you trying to do? It’s the same outrageous hours and outrageous negotiations; everyone is trying to make a buck. But the money’s not there. I have this problem with my mother: She doesn’t understand we make a product. She doesn’t see it. And Main Street says you’re still getting paid too much: Even getting cut from $1 million to $500,000, they still think you’re earning too much.