Wall Street 'bonuses' rise 14% in face of huge write-downs

Posted Dec 21st 2007 11:57AM by Zac Bissonnette
Filed under: Employees, Scandals, Goldman Sachs Group (GS), Morgan Stanley (MS)

To a Wall Street compensation neophyte, a "bonus" would seem to be something paid in the event of performance beyond that which is expected. A reader of Dictionary.com might reach a similar conclusion:

bo·nus [boh-nuh

s] noun, plural -nus·es.

something given or paid over and above what is due.
a sum of money granted or given to an employee, a returned soldier, etc., in addition to regular pay, usually in appreciation for work done, length of service, accumulated favors, etc.

So in light of the multi-billion subprime losses that nearly every major Wall Street firm is taking, how can it be that bonuses at Morgan Stanley (NYSE: MS) soared 18% year over year after a $9.4 billion writedown on bad mortgages? The stock has lost about a third of its value in the past few months, raising questions about the value the company has provided to shareholders.

You almost have to stand in awe of CFO Colm Kelleher's explanation: "If you were to normalize our business ... you would see we had a record year across the whole enterprise". (Emphasis added)

What does that even mean? Normalize equals "take out that really bad mistake we made?" It reminds me of the old joke about "So other than that Mrs. Lincoln, how was the show?" Bear Stearns' (NYSE: BSC) CFO says that "Compensation levels need to be maintained to reflect market levels." Right.

On average, bonuses at the major Wall Street firms have risen 14% this year. With the exception of Goldman Sachs (NYSE: GS), these firms have all seen precipitous declines in their share price over the past 52 weeks.

If bonuses don't on average reflect the performance of the company, they're not really bonuses. Let's just start calling them what they are: Wall Street entitlements rose 14% this year. There's something to be said for a little truth in advertising.

Tags: Bonuses, featured, Investment banks, InvestmentBanks, Wall Street, WallStreet

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Reader Comments (Page 1 of 1)

12-21-2007 @ 1:01PM

Steve in Denver said...

Normalize. In quotes. That's what I need to do. I'm a home builder. My industry is being beat to death; for no real reason. Things aren't normal..er "normal". But nuts; in thinking it through I find I'm dealing with real brick and real mortar and real lumber, real land prices, and real irrational media, etc. So how can I "normalize" my business and make a lot of $$$ and a huge bonus when I'm dealing with the real world?? Without drugs or a gun, I mean! Hey!! any investment banking jobs out there for a guy whose tired of the real world???