For major U.S. banks and securities firms, the year 2008 was one to forget. Since then, the need to cut back has been replaced by the habit of going all out, as projected compensation research indicates.
Despite Uncle Sam's meddling and populist sentiment, big compensation in finance is back and major banks are on track to pay their employees a record high of $140 billion this year, according to a Wall Street Journal analysis of 23 publicly traded finance companies.
But not every institution is ratcheting pay up this year. Taking a closer look at four investment banks in the study shows the extent to which this trend varies.
Goldman Sachs, for instance, has taken arguably the most flack for its banner year. In 2008, compensation totaled $10.9 billion. This year, it's projected to increase to $21.8 billion. The number of employees has decreased from 30,067 to 29,400 and average compensation per employee is projected to double -- from $363,655 to $743,112. The question for Goldman, of course, is whether it will be able to sustain such bounty.
Morgan Stanley will have less to give. While total compensation increased slightly from 2008 to 2009 (from $12.3 billion to a projected $16.4 billion), the bank also shouldered a significant increase in employees: from 46,964 in 2008 to 62,215 in 2009. Average compensation should stay relatively on par, going from $262,030 to $263,595. Analysts note a barely profitable third quarter as the cause for Morgan's relatively unimpressive results to date.
Jefferies Group, Inc. will have less of a reward for its employees this year. Compensation in 2008 totaled $1.522 billion, down to a projected $1.186 billion for 2009. The number of employees went up slightly, from 2,270 to 2,307, but average compensation per employee is expected to fall from $670,554 to $514,092. This figure might change as analysts expect Jefferies to have a profitable third quarter on the basis of its M&A pipeline.
Lazard Ltd.'s compensation decreased from $1.128 billion to $1.077 billion, but it also shed some of its employees (2,434 to 2,276). Average comp is expected to increase from $463,539 to $473,169. Analysts expect Lazard to benefit from increased M&A activity in the fourth quarter. Clouding that outlook is the hospitalization of the firm's CEO Bruce Wasserstein this week.
By the Numbers: 2008 vs. 2009 (projected)
Goldman Sachs:
Total compensation pool: $10.9 billion vs. $21.8 billion
Number of employees: 30,067 vs. 29,400
Compensation per employee: $363,655 vs. $743, 112
Morgan Stanley:
Total compensation pool: $12.3 billion vs. $16.4 billion
Number of employees: 46,964 vs. 62,215
Compensation per employee: $262,030 vs. $263, 595
Jefferies Group, Inc:
Total compensation pool: $1.522 billion vs. $1.186 billion
Number of employees: 2,270 vs. 2,307
Compensation per employee: $670,554 vs. $514,092
Lazard Ltd:
Total compensation pool: $1.128 billion vs. $1.077 billion
Number of employees: 2,434 vs. 2,276
Compensation per employee: $463,539 vs. $473,169
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