With profits higher than ever on Wall Street, executives are starting to shift their compensation packages away from bonuses and into higher salaries, State Comptroller Tom DiNapoli said in an annual report today.
While Wall Street salaries were up by 6 percent in 2010, bonuses declined by 8 percent
(to about $20 billion) from pre-crisis 2007.
The reason for the change? The Comptroller’s Office says Wall Street is responding to new federal regulations, and coming to accept that salaries are a more responsible way to dole out compensation. You don’t end up rewarding someone for taking a large risk, says spokesman Eric Sumberg. “It’s a different world out there.”
Of course, there’s another reason why sky high Wall Street bonuses seem less attractive than they did a few years ago. They are really, really bad for public relations.
Since the 2008 crisis hit, Wall Street has been paying a lot less in taxes to the state and the city. The Comptroller’s report says that Wall Street’s contribution to the City’s budget has declined from 13 percent of local tax revenues to 7 percent. Meanwhile, Mayor Michael Bloomberg continues to adamantly refuse to tax Wall Street bonuses, though he is all about reducing bonuses for city pensioners.
2010 was also the second most profitable year on record, with profits totaling $27.6 billion (The government bailout and other incentives made 2009 the most profitable year ever for Wall Street).
For a look at the bonus climate, check out when we hopped around the Wall Street holiday party scene at the height of last year’s bonus season.