NEW YORK – Record earnings on Wall Street are yielding windfall bonuses for its top executives.
Compensation experts predict a lucrative bonus season this year, as surging merger and underwriting activity, growing fixed income markets and a rebound in stock trading activity fuel unprecedented profit and pay.
This week traders, bankers and other executives at Goldman, Lehman and Morgan Stanley were told the size of their bonuses for the fiscal year ended Nov. 25. Bonuses make up the bulk of Wall Street compensation, and can be more than 10 times the base salary for top producers.
CEOs also saw big pay hikes amid strong growth in profit and share-price gains that outperformed the broader U.S stock market.
Goldman Sachs Group Inc. (GS), which posted its second straight year of record profit Thursday, paid Chief Executive Henry "Hank" Paulson about $38 million in salary, restricted stock and options. The third-largest investment bank by market value saw its shares rise 22 percent this year.
According to a Securities and Exchange Commission filing, Goldman on Tuesday gave Paulson 224,777 restricted stock shares worth about $30 million when priced last month. Of these shares, 89,910 vested immediately and were withheld by the firm to cover Paulson's tax obligations while the remaining 134,867 shares vest in November 2008.
Paulson, who is 59, was also granted stock options on 220,392 shares valued by the firm at about $7.3 million, with 40 percent vesting immediately. Paulson, who received a salary of $600,000 and no cash bonus this year, now holds 3.89 million shares.
Overall, Paulson's compensation rose more than 21 percent from last year.
"The compensation considers the outstanding financial performance of the firm and Hank's leadership, the share price performance and the competitive environment," spokesman Lucas van Praag said.
Earlier this week Lehman Brothers Holdings Inc. (LEH) whose stock soared 48 percent this year, said it paid chairman and chief executive officer Richard Fuld $14.9 million of restricted stock and options on 350,000 shares. Lehman, which didn't disclose the other portions of Fuld's pay package, received $10.4 million in restricted stock last year.
Morgan Stanley the largest securities firm by market value, said it paid chairman and CEO John Mack a bonus of $11.5 million for five months on the job. Acting President Zoe Cruz, a key lieutenant to both Mack and former CEO Philip Purcell, got a stock bonus of almost $14 million.
Directors at Morgan Stanley had offered Mack a $28 million bonus, citing his leadership, but said Mack requested a pro rata share of the bonus. The remainder of the bonus would be returned to the bonus pool for other executives.
The banking, brokerage and credit card company also this week raised the stock portion of bonuses for management committee members to 65 percent of total pay from 55 percent.
Shares of Morgan Stanley have risen just 3 percent this year amid a tumultuous management shake-up that led to dozens of executive departures. The firm next Tuesday is expected to report 1 percent earnings growth, as credit card losses and soaring compensation costs offset a 23 percent rise in revenue.