Wall Street firms have always been famous for their generous bonuses to managers and traders — their so-called rainmakers. The graph above shows that employee bonuses have actually exceeded the estimated pretax profits of United States securities dealers in many years.
Staff compensation has been larger than profits for just about ever in just about every company I can think of.
So?
yes, that’s not a terribly strong point is it – if every business paid in line with aggregate income shares, we’d expect to see total employee compensation of double profits, wouldn’t we.
I’d be interested to see what the labour / capital shares are in banking … that might tell us whether labour is “exploiting” capital or not
(it that right? labour share apprx. 2/3, does it imply the above?)
Most businesses tend to follow the 80/20 split between salaries/wages and profits. Property companies don’t count as businesses for these purposes.
The fact that bonuses in loss years 2007 and 2008 were quite high makes one think that the compensation system rewards something other than profitability and does not punish losses.
P&L statements might look better if the system were re-arranged.
that’s interesting Mark – so does the aggregate split of roughly 2/1 arise because of profits made by landowners and property owners?
The chart shows bonuses, not total compensation.
Matthew,
In an investment bank most of your compensation is bonus.
“Wall Street firms have always been famous for their generous bonuses to managers and traders — their so-called rainmakers.”
There are rainmakers, and there are piss-artists…
JonnyN -the figure used is 60% bonus, 40% salary, so there’s a fair chunk it’s missing.