FIVE straight quarters of losses and a 70-percent slide in its stock this year haven't stopped Merrill Lynch & Co from allocating about US$6.7 billion to pay bonuses.
Goldman Sachs Group Inc and Morgan Stanley, both still on track for profitable years, have set aside about US$13 billion for bonuses after three quarters, down 28 percent from a year ago.
Even some employees at Lehman Brothers Holdings Inc, which declared the biggest bankruptcy in United States history last month, will get the same bonus they received a year ago.
The worst financial crisis since the Great Depression, a US$700-billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won't deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts told Bloomberg News.
"Critical producers and critical managers will be retained with the same bonus they had last year," said Robert Sloan, head of US financial-services recruiting at Egon Zehnder International, a New York-based executive-search firm. "The others will see sharp cuts."
Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about US$6.85 billion for bonuses, or an average of US$210,300 for each employee, down 32 percent from US$339,400 a year ago.
Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has US$6.44 billion for bonuses, or US$138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.
The money Merrill has set aside for bonuses equates to an average US$110,000 for each of its 60,900 people, up from US$108,000 a year ago because more than 3,000 jobs have been cut.
The bonus figures are based on estimates that about 60 percent of the compensation and benefits expenses reported by the companies will be paid in year-end bonuses, as occurred in past years.
Average bonuses aren't an indication of how much any employee will receive, since payments range widely from assistants to top traders. Bonuses aren't paid until the end of the fiscal year, so firms could choose to reallocate the funds. "We are in the process of determining appropriate levels of year-end compensation, and no decisions have been made," said Mark Lake, a spokesman at Morgan Stanley.
Merrill spokeswoman Jessica Oppenheim said the firm's accrued bonuses haven't fallen as much as those at Goldman and Morgan Stanley because the firm reduced expenses last year, when it also had a loss. Compensation costs are down 18 percent this year, compared with the first nine months of 2006, Merrill's last profitable year.
A worldwide economic slowdown, caused in part by the financial industry's losses, and a US Treasury plan to spend US$250 billion of taxpayer money buying stakes in banks, have made pay a political issue this year.
"There should be a moratorium on bonuses," said Barney Frank, chairman of the House Financial Services Committee. "If nobody gave them, there wouldn't be a competitive aspect."
In Zurich, protesters blocked UBS AG's private-banking branch on Paradeplatz last week to seek curbs on executive pay after Switzerland's largest bank was forced to ask for government aid.
"I'm just flabbergasted that the financial community has failed to show any sense of leadership on this issue and doesn't seem to understand how angry people are at them," said Nell Minow, editor of Corporate Library, a corporate-governance research firm. "They are just a bonus away from having the villagers come after them with torches."
New York-based Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns Cos awarded their employees a cumulative US$145 billion in bonuses from 2003 through 2007, according to company reports. That's more than the annual gross domestic product of the Philippines. Last year the firms paid out a record US$39 billion.
At the end of this year, companies may decide against paying the money accrued for bonuses and instead use part of it to cover severance costs, said Rose Marie Orens, a New York-based partner at Mercer, the human resources consulting unit of Marsh & McLennan Cos, who specializes in executive compensation for financial-service companies. Goldman and Morgan Stanley end their fiscal year in November, and Merrill's ends in December.
"Whether what you see is what they're going to pay, you can't tell yet," she said. "It's highly unlikely they'll add to those numbers and more likely they'll bring them down."
Lehman filed for bankruptcy on September 15. Merrill Lynch and Bear Stearns were rescued in emergency sales to Bank of America and JPMorgan Chase & Co in New York. Goldman and Morgan Stanley are each receiving US$10 billion of capital from the government.
Bank of America is offering Merrill's US brokers bonuses of as much as 100 percent of the revenue they generate to keep them after the deal is complete, industry sources said. Scott Silvestri, a spokesman for Bank of America, declined to comment.
Employees at Lehman Brothers in Europe have been promised by their new owner, Nomura Holdings Inc, that they will receive the same bonuses as last year.