Thursday, February 5, 2009
Wall St. Pay Is Cyclical. Guess Where We Are Now.
The New York Times - To most people, a salary cap of $500,000 would be anything but punishment.
But in Wall Street’s executive suites, it amounts to a humbling pay cut — and, just maybe, the beginning of a cultural shift.
True, the rich always seem to find new ways to get richer. But in the sweep of history, high pay on Wall Street comes and goes through cycles of excess and correction. After an age of astonishing wealth, the cycle, experts say, seems to be turning once again.
The Obama administration’s curb on executive pay, announced on Wednesday, is a limited step. But government actions tend to work best when they are in step with market forces and public opinion. Wall Street’s wayward bonus system, analysts note, is now widely criticized, even in banking circles, for contributing to the economy’s woes.
Understandably, pay is a touchy subject for financial executives these days, with reports last week that total bonus payments at New York financial companies last year reached $18.4 billion.
But with tighter regulations on risk-taking and greater public scrutiny, the pay for top bankers could fall into line with pay for other professions, like doctors and lawyers.
Indeed, high pay on Wall Street is an episodic phenomenon. A recent paper by two economists studied pay in finance from 1909 to 2006, comparing the industry’s pay levels with the private sector as a whole, seeking to adjust for education, skills, age and gender of the workers.http://www.nytimes.com/2009/02/05/business/05bonus.html?partner=permalink&exprod=permalink
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