Something tells me this news isn’t going to clear out Zuccotti Park. According to a closely watched survey on financial industry compensation, Wall Street bonuses are expected to fall by 20 to 30 percent from last year. A post late Monday on the New York Times’ DealBook blog quotes the annual survey by Johnson Associates, a New York compensation consulting firm, which reported that everyone from traders to investment bankers to top Wall Street executives are likely to see the size of their bonuses tumble when handed out early next year.
While that may be a move in the right direction for Occupy Wall Street protestors frustrated by bankers’ outsized pay, it’s not likely to change their views on the issue very much. That’s in part because Wall Streeters will still take home anywhere from $100,000 to $1 million (for top execs) in base pay, as well as several times that amount in their end-of-the-year reward. And even if it is 20 to 30 percent lower than in the past, most finance types will still get the bulk of their pay in the form of a bonus. “This year,” the Times reports, as if this is a novel concept, “the message has been that ‘star performers’ will be paid and the rest of Wall Street will feel the pain.”
That, of course, is how bonuses work in the rest of the business world. Sizeable ones are only given to truly outstanding employees. Bonuses do not make up the majority of average employees’ pay, but are typically a nice extra. And they are held back, often completely, when it’s been a tough year.
That gets at the heart of what’s wrong with compensation on Wall Street. It’s not just that the pay is too high—though one could certainly argue that it is, especially when this year’s number is a 20 to 30 percent drop from a number that had been rising. It’s that something that should be a reward only for particularly good performance has become an expected part of the equation. What was once a carrot dangled for good performance has become something counted on for anything but.
Until the banks change this culture of entitlement around bonuses, in which it’s considered an outlier year when stars get bonuses and others get a smaller one, the size of the average banker’s pay isn’t likely to stay down for long. It’s worth noting, after all, that the survey isn’t talking about these folks seeing their bonus eliminated—something that happens to many employees in down years—just that they’re expected to be one-fifth to one-third less. If you made a $300,000 bonus last year, you’ll still be coming home with about 225 grand.
Even if one day banking leaders fix the culture of entitlement on Wall Street, they’ll still need to find a way to counteract the transactional nature of a career in finance. In many Wall Street jobs, there is simply not all that much in the way of psychic rewards: the satisfaction of a product well made, the gratification of a person’s life made better, the innovative pursuit of a technology that will change the world. Bear Stearns trader and Adelphi University visiting professor Michael Driscoll perhaps put it best—or most disturbingly—when he told the Times that “right or not, compensation is how you measure yourself and your value.” As long as people view their worth in those terms, and those terms only, the question about hefty Wall Street bonuses is not likely to go away.
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