Yesterday was Bonus Day at Goldman Sachs, when nervous employees learned the fate of their year-end paychecks. There had been speculation all over Wall Street that bonuses were going to take a huge hit this year (2011 revenue was down across the board) and judging by reports filtering out to financial reporters there seems to be some truth to that. Inside tipsters told John Carney at CNBC that it was "a bloodbath" at Goldman with nearly everyone feeling the pain of lower compensation.
Of course, terms like "pain" and "bloodbath" are all relative in the world of big money investment banks. People outside the financial industry don't want to hear those inside it complain about the size of their (still sizable) cash payouts. Still, on Wall Street the annual bonus is more than just a pat on the head for a job well done. It's the key component of a person's wealth, influence, and self esteem. Though, in truth, we still know very little about what the numbers are or how they are calculated.
Every one gets a base salary (which can be quite generous on its own), but bonuses can make up a huge part of the employee's yearly income. In a good year, a person's total pay can double in one day. In bad years, however, the lack of bonus can be a huge blow to your bottom line ... and a hurtful reminder of where you stand at your firm. The uncertainty of knowing what you're actually being paid can make it hard for anyone to keep their sanity. If you get too comfortable with bonuses that are 60 or 70 percent of your base salary, then suddenly get handed one at 20 percent, you just took a huge pay cut that might seriously force you to reconsider your standard of living. (A $40,000 bonus sounds pretty amazing to most people, but when you made 70k or 80k the year before, that still hurts.) The process is made even more treacherous by the fact that employees receive the news in glass-walled conference rooms in view of their co-workers and must keep a brave face no matter what they hear.
According to reports, Goldman's bonuses turned out to be disappointing, but not disastrous. Some people had feared getting no bonus at all, or worse, a reduction in base pay, but it appears that most people got at least a little something for the trouble and the cuts that did happen were almost universal. Everyone is sharing in the "misery."
This article is from the archive of our partner The Wire.