Cash bonuses paid to New York City-based securities industry employees fell by about 8% to $20.8 billion last year, New York state Comptroller Thomas P. DiNapoli said Wednesday.
Last year's aggregate bonus payments were one-third less than what was paid in 2007, Mr. DiNapoli told reporters during a conference call.
The decline reflected changing compensation practices among Wall Street firms, such as deferred compensation and higher base salaries, he said, adding that previous payment practices “rewarded short-term gains at the expense of long-term profitability.”
Although the changes “will hold down tax collections this year,” Mr. DiNapoli said the state and New York City “will benefit in future years when taxes are paid on this deferred compensation.” In addition, the new compensation practices “will reduce unnecessary risk-taking.”
His estimate “is based on personal income tax trends and reflects cash bonuses and deferred compensation for which taxes have been prepaid,” according to a news release from Mr. DiNapoli's office. “The estimate does not include stock options that have not been realized or other forms of deferred compensation.”
Among other items in the report:
• Profits of the broker/dealer operations of NYSE-member firms totaled $27.6 billion in 2010, second in profits only to the $61.4 billion in 2009, “which was fueled by federal bailouts, low interest rates, and proprietary trading.”
• Although the size of the cash bonus pool has declined, “an examination of the financial statements for selected securities firms indicates that overall compensation was higher by 6% percent in 2010.”
• Wages for workers in the New York City-based securities industry during the first half of 2010 were 21.9 % higher than a year earlier, “reflecting cash bonuses paid during the first quarter of 2010 for 2009 activities, higher base salaries and deferred compensation that was realized during that period.”
• The securities industry in New York City lost 30,700 jobs during the recession, a decline of 16%. However, the industry added 3,600 jobs between August 2010 and December 2010.
Mr. DiNapoli issues an annual report about bonuses paid to securities industry employees who work in New York City. Bonuses paid by New York City-based securities firms to employees located outside of the city are excluded, according to a news release issued by Mr. DiNapoli.