On Wednesday, it was reported by a top compensation consulting firm, Johnson Associates, that Wall Street is likely to cut bonuses this year by 15 to 20%. These numbers were revised downward from a dire 30 to 40% reduction made earlier in the year. At that time, Alan Johnson’s views were pretty bleak, calling for 2020 bonuses to decline by as much as 40%, as the coronavirus outbreak hit markets hard and put millions of people out of work.
He considers the tough climate and predicts Wall Street firms will likely cut pay for almost everyone to save cash. Johnson figures “subpar” employees will see bonuses drop over 50% and possibly be fired. Johnson said, “Now is the time to get rid of the people you probably should have gotten rid of before.” He added, “The industry has been carrying some extra weight for a while.”
Johnson pointed out, “Technology has shown us that we don’t need as many people, don’t need as many management levels…and in many places there is going to be job insecurity.” He also believes that incentive compensation will be closely monitored, in light of the current social and political climate inspired—in part—by the Black Lives Matter movement. This enhanced scrutiny will extend to chief executives’ compensation at public companies, Johnson wrote.
“With the impact of COVID-19 and recent focus on justice and equality, it will require a thoughtful analysis and balance of performance, competitive and societal priorities, and customer and employee expectations,” Johnson wrote. “This is not a year to be tone deaf.”
Forbes / June 24, 2020