March 1, 2012; Source: Time
No one here would ever defend out of control, unjustified salaries and bonuses in the nonprofit sector, but there are no tears being shed at Nonprofit Quarterly for the dip in the average bonus pool for Wall Street firms. New York State Comptroller Thomas DiNapoli closely watches Wall Street compensation and bonuses in order to predict tax revenues.
DiNapoli says that Wall Street profits fell to $13.5 billion in 2011, compared to $27.6 billion in 2010 and the record $61.4 billion figure at the height of the recession in 2009 (as you’ll recall, the 2009 profits were boosted by the much ballyhooed—or criticized—bailout paid for by American taxpayers). The average cash bonus (as opposed to the total bonus pool) declined from $138,940 in 2010 to $121,150 in 2011.
In other words, though Wall Street profits fell by half, the average cash bonus declined only 13 percent. Experts had actually predicted an average bonus decline of 20 to 30 percent.
Sign up for our free newsletters
Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.
Wall Street profits and bonuses show up in tax revenues. DiNapoli’s report indicates that tax collections attributable to Wall Street account for 14 percent of state tax revenue, compared to 20 percent prior to the recession (also accounting for seven percent of New York City tax revenues, compared to a pre-recession 13 percent).
Let’s make sense of these numbers in the context of what we face in the nonprofit sector. The lower average bonus of $121,000 for Wall Street workers is larger than the salaries of the vast majority of nonprofit executive directors. It is even larger than the total revenues of a ton of nonprofits. And do note that we are talking about Wall Street bonuses, not base compensation levels. Overall compensation—base salary plus bonuses—are simply out of the nonprofit ken. We don’t know about the 2011 total compensation levels, but in 2010, the average total compensation for Wall Street workers was $361,180, quite capable of sustaining the bankers’ and brokers’ lifestyles.
The $19.7 billion size of the total bonus pool is massive, almost as high as the total profits earned on Wall Street. Some people believe that Wall Street bankers and traders deserve the bonuses as rewards for their hard work in sustaining American capitalism. For instance, the upcoming March 12th issue of Time includes discussion of “high-status stress,” the idea that highly compensated types like Wall Street people face more stress than the rest of us slogging through society at lower incomes. Likewise, Business Insider reports on a study appearing in the March/April issue of the CFA Magazine stating that 10 percent of people in the financial services sector exhibit behavior that can be characterized as psychopathic compared to one percent among the overall population. The study’s author, a Canadian forensic psychologist named Robert Hare, says, “These ‘financial psychopaths’ generally lack empathy and interest in what other people feel or think. At the same time, they display an abundance of charm, charisma, intelligence, credentials, an unparalleled capacity for lying, fabrication, and manipulation, and a drive for thrill seeking.” Business Insider notes that the CFA Magazine article concludes that “the best candidates for many Wall Street jobs exhibit the traits of a financial psychopath.”
Enjoy your bonuses, you Wall Street traders! And nonprofits can remember that $19.7 billion in Wall Street bonuses reflects a powerful statement of the economic inequities in our society that have to be overcome.—Rick Cohen