Another day, another fit of bonus neurosis | FT Alphaville

Another day, another fit of bonus neurosis

There seems to be barely a day without a bonus-related development or rant from an aggrieved banker or outraged commentator.

More so now that Wall Street’s bonus fixation and middle-American “bonus rage” has drifted across the Atlantic to the UK – where the recent spectacle of the big UK bank chiefs waiving their rights to 2009 bonuses seems to have mollified the would-be anti-bonus ranters – for now.

We don’t really want to add to the tidal wave of coverage but the latest selection of bonus-related developments do raise some noteworthy points.

We were intrigued, for example, to see Morgan Stanley’s chairman (and recenty retired CEO) John Mack wade into the fraught debate, telling an audience on Wednesday in North Carolina that investment bankers are overpaid and warning that Wall Street compensation “won’t decrease much because firms don’t want to lose their best performers”, according to Bloomberg.

“I still don’t think the industry gets it… The issue is not structure, it is amount,” he said.

More striking was Mack’s call for an “open discussion” on compensation between the key investment banks and regulators. His rationale – “if we don’t do something, the government will do something” – was perhaps understandable.

But after the roasting Mack and his peers (Goldman Sachs’s Lloyd Blankfein, JPMorgan’s Jamie Dimon and Bank of America’s Brian Moynihan) got in Congress in January, we wonder if Mack is just being mischievous, or masochistic.

Just to remind, the latest figures on compensation at the big Wall Street banks, revealed this week by New York State comptroller Thomas DiNapoli, showed that Wall Street bonuses topped $20bn last year, rising 17 per cent from 2008, while banking profits are likely to have exceeded $55bn, almost three times the previous record.

Top Wall Street banks reported that total compensation as a percentage of net revenues had fallen in 2009 by an estimated one third from the 2007 payouts.

Even so, the average taxable bonus had risen to $123,850, even as among top bankers and traders, the payouts were significantlly less than in 2007, DiNapoli’s report showed,

BreakingViews points out on Wednesday that despite all the bitching and moaning, Wall Street is still a Good Place to Be. While overall bonus levels in the banking industry have come down somewhat, in both jobs and remuneration terms the industry has been surprisingy resilient – reinforcing the the widespread belief that once again, the industry has gotten off lightly.

Indeed, as we noted recently, despite considerable rhetoric from both regulators and industry leaders, it seems most measures to curb excessive compensation have failed.

What is new, however, is a shift in both the direction and nature of compensation. As the Wall Street Journal reports on Thursday, traders, investment bankers and top executives at Wall Street securities firms are losing ground in the compensation stakes to the new bonus stars: brokers.

In what the paper calls a “significant reversal in the typical pecking order of Wall Street pay”, the report examines a surge in retention and signing bonuses among brokers – bonuses that, it says, come on top of the $3m-$5m payouts that top brokers can earn annually through fees and commissions.

Of course, though, we’re sure there are still plenty of those such as the 28-year-old Morgan Stanley trader whose unit had earned $300m-$400m for the investment bank. According to John Mack, although Morgan Stanley offered $11m in compensation, the trader jumped to a hedge fund that paid him $25m.

The latest trend taking hold in the UK, of top bankers renouncing their bonuses, meanwhile, leaves the FT’s Lombard column somewhat bemused:

It would be nice if more well-paid bank staff renounced their bonuses simply because it was the right thing to do. Perhaps that will be one side-effect of their leaders’ sacrifices. But while these gestures are welcome, when reining in excess it is wiser to rely on carefully calibrated regulation and keen oversight by wary investors than on top bankers’ public humility.

Related links:
More bonus neurosis: Thain and how times have changed FT Alphaville
Bonus neurosis, revisited: Mine’s bigger than yours – FTAlphaville
Media-fuelled Goldman bonus neurosis – FTAlphaville