Bloomberg reporter Christine Harper reports an average Wall Street bonus of just over $200,000, from a wealth pie of $38 billion, spread out over 180,000+ individuals. In stark contrast, she adds that "Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity." About this same time last year, USA Today reported an average investment banking bonus of $137,580. (Read "It's a Wall Street bonus bonanza, December 20, 2006.)
With approximately 45 percent more in year-end goodies to take to the bank, financial professionals will be in fine mettle to celebrate Thanksgiving on November 22 this year. Yippee!
Even folks like Freddie Mac (FRE) CEO's Richard F. Syron must be happy in the piggybank department. According to the Washington Post, their accounting of 2006 rewards ("Top 100 Executives by Total Compensation") lists his take as a mere $1.1 million in salary but $15.5 million in aggregate. Never mind that a November 20, 2007 press release reports a third quarter loss of $2.0 billion, reflecting "a higher provision for credit losses and losses on mark-to-market items" and "total GAAP mark-to-market losses of $3.6 billion," including $1.5 billion in "interest-rate related items." (Read "FREDDIE MAC REPORTS THIRD QUARTER 2007 NET LOSS OF $2.0 BILLION OR $3.29 PER DILUTED SHARE: Core Business Growth Offset by Credit and Valuation Losses.")
Even if you believe in the power of free markets to determine performance-linked compensation (and further acknowledge that some Wall Streeters contributed to shareholder wealth), these big numbers don't play well in Peoria. They especially don't go over well in pensionland.
At a time of strained state budgets and company layoffs, enticing qualified persons to work on pension issues is not a walk in the park. As we've discussed MANY times, it's tough to attract experienced, knowledgeable persons to sign on as fiduciaries. The payoffs are asymmetric at best. Do a great job and the reward is small. Do a bad job and the liability is great.
How will they express gratitude when the discussion turns to pecuniary rewards?