Why Wall Street bonuses were not actually $244k per person for 2024
The Wall Street Comptroller has spoken. He says that Wall Street bonuses for 2024 were the highest they've ever been. - That the total bonus pool was $47.5bn in New York City alone. That the average bonus given to a securities industry employee in New City was $245k per head. And that this average bonus was up 31% year-on-year and exceeded even the previous record of $240k per head, which he says was paid in 2021.
This might come as a surprise to many on Wall Street, not all of whom were happy with last year's pay. Bonuses were up for 2024. Many would dispute that they were the highest ever.
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The disjunction possibly comes from the way the Wall Street Comptroller calculates bonuses. Based on income tax revenues from people in the securities industry, they reflect only cash bonuses for 2024, plus deferred bonuses from previous years that have been cashed in. The comptroller's figures are therefore neither an accurate reflection of 2024 bonuses; nor do they measure 2024 payments alone.
On one hand, the figures understate the total. An increasingly high proportion of bonuses above vice president (VP) level are not paid in cash, but in deferred stock. New York headhunters say that VP-level deferrals are typically 25%-30% of bonuses, that director deferrals are typically 30%-40% of the bonuses and that managing director deferrals are 50%+. By measuring only cash, the comptroller is conceivably registering only 60% of the bonus pool in any given year.
On the other hand, the figures overstate the total. Because they reflect deferred bonuses that have been cashed out, the Wall Street Comptroller's figures will skew higher in years when securities industry employees sell stock they received in previous years. When banks' stock prices are high, those sales will be above average.
In 2024, bank stocks boomed. The KBW banks' index rose around 27% to levels last seen in late 2021. Goldman Sachs stock alone was up over 50% during the year.
The Wall Street Comptroller's estimation of 2024's apparently booming Wall Street bonuses, may therefore be down to savvy bankers selling previous year's stock bonuses at high prices, rather than banks' specific generosity for last year.
And given the high proportion of deferred stock at MD level, it's conceivable that 2024 was simply the year when MDs cashed out at a higher rate than ever before. This is what the comptroller is likely to be measuring, really. And it explains why 2024 bonus round felt good but not like an all-time great.
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