Think Wall Street is the land of plenty when it comes to compensation? Think again. If 2011 pay to top executives is a window into the Wall Street compensation machine, then compared with other industries – the entertainment media, for instance – the bloom is definitely off the rose.
In 2011, the best-paid Wall Street executive was Jamie Dimon at JPMorgan Chase with $23 million (R190m). John Stumpf of Wells Fargo got $18m, while Lloyd Blankfein at Goldman Sachs had to settle for $16m. Although Vikram Pandit at Citigroup got $15m, 55 percent of Citigroup’s shareholders voted for a non-binding resolution that would have denied him that pay. James Gorman at Morgan Stanley took $11m, a cut of 25 percent from 2010. Brian Moynihan at Bank of America got $8m.
I understand that this is a lot of money. And that it remains true that Wall Street firms pay out a larger percentage of their annual revenue as compensation to staff than any other industry where firms are publicly traded – between 40 percent and 50 percent, although Lazard has averaged a payout ratio of 63 percent of revenue for the past two years. Yet there is a pattern: absolute levels of Wall Street pay, in relation to some other fields, are coming down.
And for good reason. Profits have dipped, return on equity is down, revenue growth is down, stock prices are down and regulation is up. And a way out of this conundrum is unlikely. While few tears will be shed for Wall Street’s bosses, or for anyone else employed there – after all, where else can so much money be made without putting in your own capital? – these trends may bring a sea change at the big banks.
For a generation, Wall Street has recruited the world’s best and brightest mostly by promising them more money than they can possibly make elsewhere. It is the rare Wall Street employee, especially among those starting out, who admit to being motivated by anything other than the pay they’ve been promised. But when that promise can no longer be kept and cheques are smaller than expected, the best and the brightest begin voting with their feet.
Where do they go? If the theorem is true that they follow the money, there should be a stampede back into professions such as the media, where top executives quietly hauled down a fortune in 2011 compensation. Les Moonves, the boss of CBS, was paid $70m in 2011. David Zaslav of Discovery Communications received $52m, while Philippe Dauman at Viacom got $43m. Walt Disney’s Robert Iger got $31m. Jeff Bewkes, at Time Warner, was paid $26m in 2011.
Even the top brass at Comcast, Brian Roberts and Steve Burke, received compensation of $27m and $24m, respectively, despite their pay cuts of 13 percent and 32 percent, respectively, from the previous year.
Six media bosses made the top 15 of AP’s list of highest-paid executives released last week; not a single banker joined them. No doubt these talented executives are worth every penny of their pay: profits at their firms are up, as are stock prices. But one would be hard-pressed to remember the last time that the top pay at media companies outstripped that of Wall Street.
This shift occurs infrequently, and could signal a new era when the pay potential is no longer highest on Wall Street. Combine that with how miserable it is to work at those banks every day, and there may be value for the leaders of Wall Street to rethink not only their business models but what they need to do to continue to attract the best and the brightest when offering the highest pay is no longer an option.
William Cohan is a Bloomberg columnist. The opinions expressed are his own.