I come not to bury bonuses, but to praise them.
Yesterday the New York State Office of the Comptroller released itsannual report. The report is chock full of great tables and charts (seethis, this, and this). The key takeaways include these data points:
• The bonus pool for securities industry employees who work in New York City grew by 3 percent to $28.5 billion in 2014.
• The average bonus rose by 2 percent to $172,860 in 2014, the highest level since the financial crisis.
• The securities industry added 2,300 jobs in New York City in 2014, after years of downsizing.
• The cost of legal settlements related to the 2008 financial crisis continues to be a drag on Wall Street profits.
Two factors have made Wall Street bonuses a contentious issue: The size of the payouts, and that they were awarded in so many companies that had been bailed out.
I have been highly critical of both Wall Street and the bailout of banks during the crisis. However, it’s important to distinguish how Wall Street’s rank and file employees are compensated from what senior management “got away with.” Most professionals understand this difference intuitively, but much of the public and many elected representatives do not. They view enormous bonuses as a sign of excess or corruption.
As a denizen of the Street for a few decades, I’ve received bonuses big and small. The bonus structure on Wall Street serves three primary purposes: Continues here