Despite the clamor over executive compensation, major U.S. banks and securities firms are set to pay employees a record $140 billion this year. Staff at the top 23 investment banks, hedge funds, asset managers and stock and commodities exchanges will earn more this year than they did during the peak year of 2007, reports the Wall Street Journal.
The rebound in compensation is a result of a stronger stock market, easing of the credit crunch, and a pick-up in deal making in capital markets. It also reflects the attitude by many Wall Street firms that they must pay top dollar to retain top talent.
Investment banks such as Goldman Sachs and Morgan Stanley typically pay employees roughly 50 percent of revenues. Commercial and other banks, which have tellers and other retail-banking support personnel, usually pay a lower rate.
The Wall Street Journal analysis pegs Goldman as being on track to pay a record $21.85 billion to employees, a figure that’s disputed by Goldman. Securities records show Goldman paid out $20.19 billion in 2007.
A Goldman spokesman said the firm must offer competitive pay packages or risk losing key executives to non-U.S. companies, private equity firms and hedge funds. Employees also have a long-term stake in the company because many are compensated in shares which they can’t touch for years. Average compensation per employee at Goldman is set to reach $743,000 this year, which is double last year’s $364,000 and up 12 percent from $622,000 in 2007, according to the Wall Street Journal analysis.