It might seem fair that no one on Wall Street get a bonus this year. The market caps of major financial firms are down by $74 billion this year. Shareholders are beaten up. Who should pay for that?
Well, the big financial firms are going to hand out about $38 billion in bonuses this year. According to Bloomberg, "That money, split among about 186,000 workers at Goldman Sachs Group Inc. (NYSE:GS)., Morgan Stanley (NYSE: MS), Merrill Lynch & Co. (NYSE: MER), Lehman Brothers Holdings Inc (NYSE: LEH). and Bear Stearns Cos. (NYSE: BSC), equates to an average of $201,500 per person," according to data compiled by the financial news service.
The largest piece of the money will go to bankers who handled IPOs and mergers. Bloomberg adds: "In the first nine months of 2007, Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns told their shareholders that they set aside $52.4 billion for compensation, up 9 percent from a year earlier."
The argument that Wall Street management will make is that executives in sections of their firms that did well should not have to take compensation cuts because a few divisions had huge losses.
But investors may not accept that excuse. Shares in Morgan Stanley are down more than 35% this year. Bear Stearns is down more than 40%.
As usual, shareholders will not have much to say about compensation, but cutting profits with huge compensation packages does add insult to injury.
Douglas A. McIntyre is an editor at 247wallst.com.
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