Page 91 - untitled
P. 91
FINANCIAL CRISIS INQUIRY COMMISSION REPORT
Compensation in the financial sector outstripped pay elsewhere,
a pattern not seen since the years before the Great Depression.
ANNUAL AVERAGE, IN 2009 DOLLARS
$120,000
$102,069
100,000 Financial
80,000
$58,666
60,000
40,000
20,000
0
1929 1940 1950 1960 1970 1980 1990 2000 2009
NOTE: Average compensation includes wages, salaries, commissions, tips, bonuses, and payments for
SOURCES: Bureau of Economic Analysis, Bureau of Labor Statistics, CPI-Urban, FCIC calculations
Figure .
started at Morgan Stanley, it was a private company. When you’re a private company,
you don’t get paid until you retire. I mean, you get a good, you know, year-to-year
compensation.” But the big payout was “when you retire.”
When the investment banks went public in the s and s, the close rela-
tionship between bankers’ decisions and their compensation broke down. They were
now trading with shareholders’ money. Talented traders and managers once tethered
to their firms were now free agents who could play companies against each other for
more money. To keep them from leaving, firms began providing aggressive incen-
tives, often tied to the price of their shares and often with accelerated payouts. To
keep up, commercial banks did the same. Some included “clawback” provisions that
would require the return of compensation under narrow circumstances, but those
proved too limited to restrain the behavior of traders and managers.
Studies have found that the real value of executive pay, adjusted for inflation, grew
