Despite this year’s Wall Street carnage, more than two-thirds of financial services professionals are expecting a bonus for 2008, according to a new survey. Even more eye-opening, 36 percent are expecting a bigger bonus than last year.
Whatever bonuses they ultimately get should draw plenty of attention, given that taxpayers have plunked down more than $1 trillion to bail out failing and struggling financial institutions.
“While the survey results would seem to run contrary to the current economy, chaotic markets, bank failures, and unprecedented government intervention, the reality is that for many on Wall Street, they will receive bonuses this year, as even institutions that are suffering will reward professionals,” eFinancialCareers, which surveyed more than 1,300 employed U.S. financial services professionals, said in its report.
Most of those who expect a bonus increase, though, think it will be 10 percent or less over last year. Just 16 percent anticipate a double-digit bump. At the high end, 7 percent expect their bonus to soar at least 51 percent.
Some of these people are probably indulging in wishful thinking, according to Alan Johnson, managing director of Johnson Associates, a compensation-consulting firm that specializes in financial-services organizations. He said the average Wall Street bonus will be down 40 to 50 percent from last year.
Among the 36 percent of respondents to the eFinancialCareers who believe they will get bigger bonuses, Johnson said, some certainly would be people who are guaranteed by the terms of their employment to get more, as is often the case during an employee’s first couple years with a firm. An employee might, for example, be scheduled to get a $10,000 bonus for the first year, and $20,000 the second year.
In addition, some Wall Streeters, although not too many, did do better this year and will be paid bonuses accordingly.
As for the rest? “It sounds like a lot of people are waiting for the tooth fairy,” Johnson told CFO.com. “They’re in denial. If you’re a senior professional who has been around awhile, and you really believe you’re going to get more — that’s scary, with the financial results of these firms, with many of them getting taken over, with the government investing in them, with all the layoffs.”
Yet the survey respondents who believe they will get a bigger bonus outnumbered the 30 percent who think their bonus will be less than 2007, while 34 percent expect no bonus at all.
“While the bonus pool will certainly be down substantially this year, bonuses will still be paid to those individuals who generated revenue for their institutions,” said John Benson, founder and CEO of eFinancialCareers.com. “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.”
Indeed, the higher up the pecking order people are, the more likely they expect to receive a payout. According to the survey, 71 percent of those holding front-office jobs were the most optimistic about receiving a bonus, while 56 percent of back-office workers expect a payout.