Some Wall Street executives could be in for a nice pay increase — and that’s on top of the hefty bonuses handed out in 2013.
A recent report revealed that New York’s financial sector paid $26.7 billion in bonuses last year. This proved to be the biggest bonus year since 2008, and amounted to roughly $165,000 extra compensation per employee. That’s 15 percent higher than the average bonus paid in 2012.
In addition to last year’s bonuses, major banks are looking at ways to increase how much their executives are paid now that the government may limit future bonuses.
According to The Wall Street Journal, Citigroup and Morgan Stanley are among the financial institutions that want to increase the base salary for select executives. Other, top-producing employees could receive a pay boost as well.
This is the banks’ way of sidestepping a new law that will prohibit TARP (Troubled Asset Relief Program) recipients from paying limitless bonuses to its top 25 executives. The top five execs are expected to be hit the hardest.
Trickle Down Effect
Laws are constantly evolving. They can be rewritten, overturned or thrown out entirely.
If Wall Street institutions begin to increase the pay for some of its employees, that move may eventually trickle down to other employees that weren’t expected to be effected by the bonus cap.
Better still, when the caps are lifted, banks are unlikely to reduce its employee salaries. Those measures occur when a company is headed for trouble (read: layoffs), but it is highly unlikely that a bank would lower its employee compensation after finding ways to sidestep the new limitation.
If the base pay isn’t reduced, guess what happens when the bonuses are reinstated at the full amount? The executive pay will go even higher.
This will inevitably increase the lure of Wall Street as an exciting career path, particularly for those who aspire to become a high-ranking leader at a prominent financial institution.
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