One might think that a Wall Street professional getting a bonus for the horrific 2008 year, especially if it’s a bigger bonus than for the previous year, should be ecstatic or at least relieved. But that appears to not be the case.
In an eFinancialCareers.com survey of 900 Wall Streeters who were still employed, and who had already heard about their bonus, an eye-opening 79 percent reported that they received one. That well surpassed the 66 percent who told the website in October that they were expecting a bonus.
What’s more, 46 percent of the respondents claimed to have gotten more than they did for 2007, whereas only 36 percent had anticipated that outcome.
However, illogically, or perhaps tellingly, only 26 percent reported being satisfied or very satisfied with their bonuses, with almost twice as many (46 percent) expressing dissatisfaction. Compensation observers, both within and outside of eFinancialCareers, shook their heads in wonder.
People on Main Street, and certainly politicians, will have difficulty understanding the reasons for the results, according to John Benson, CEO of eFinancialCareers. “Many people would view that as being spoiled in the extreme,” he told CFO.com. “Frankly, in this environment, a lot of [the survey respondents] should be thankful for still having a job.” Referring to government bailouts for financial firms, he noted that “people are struggling thinking that taxpayers’ funds are being paid to bonuses.”
John Douglas, a banking partner at law firm Paul Hastings, which also has a compensation and benefits practice, called the survey results “fascinating, particularly since Wall Street as we knew it is gone.” All the major investment banks are now either out of business or part of bank holding companies, which historically have paid far fewer and lower bonuses, he pointed out. One way to interpret that: If financial services managers were unhappy with their bonuses this year, watch out for an explosion of rage 12 months from now.
“It just goes to show you how highly they think of themselves,” Douglas, who was general counsel to the Federal Deposit Insurance Corporation during the savings-and-loan crisis 20 years ago, told CFO.com.
A big reason for the culture of entitlement is likely that there are so many young people on Wall Street. According to Douglas, about 90 percent of the survey respondents who were displeased with their bonus have been in the industry for five years or less — meaning they missed the last downturn, when the average bonus in New York fell by 40 percent from 2001 to 2002.
Look for financial institutions to implement clawback provisions to recoup contractually agreed bonuses when financial results don’t pass muster, and for some to innovate in the manner of Credit Suisse, which is paying some of its bonuses with the toxic assets on its books, Douglas said.
Not that a bank giving out bonuses during a recession is an inherently flawed strategy. Rather, it remains an important retention tool. As Benson told CFO.com in October, “For those who performed, the failure to receive a bonus may make them receptive to offers from other employers, and banks cannot afford to lose their top performers right now.”
Meanwhile, 54 percent of survey respondents said they expect to be job hunting in 2009, and only 16 percent said flat-out that they won’t be looking. However, that result likely contains a good deal of bias, since eFinancialCareers is a site where people go to look for finance jobs.
Similarly suspect, though somewhat interesting nonetheless, is that only 15 percent of respondents said they were “very happy with my job and not looking to move.” By comparison, 39 percent said “my job is fine but I’d be open to another opportunity,” 20 percent said “unhappy with my job and looking to change as soon as possible,” 16 percent said “would love to switch jobs but staying put for now to play it safe,” and 10 percent said “looking for a job due to concern of being eliminated in light of current market conditions.”