This year, companies are giving out more of the rewards in stock that cant be redeemed for years, limiting the economic benefits for businesses that cater to the Masters of the Universe.
Whether they sell $5 million condos or $50 steaks, those businesses are bracing for a winter without the typical bonus rush.
They are taking away the pot of cash, and without that cash, there cant be a trickle-down effect, says Alan Stillman, owner of the New York steak house Smith & Wollensky. Everyone feels it. The taxi drivers, doormen, waiters, everyone.
With banks earning billions again, they are set to pay near-record bonuses for 2009. Last Thursday, Goldman Sachs said it rewarded employees with $16.2 billion in salary and bonuses for the year, up almost 50% from the year before.
But those same firms are bowing to political and public pressure and paying more of the bonuses in stock that cannot be redeemed right away. Goldman announced in December that its top 30 executives would get only stock that cant be sold for five years.
Typically, Wall Street bonuses are paid in a 50-50 split between cash and stock, in the form of restricted shares or stock options. Because they cant be cashed in for a set time, the ultimate payout depends on the fluctuations in the companys stock price.
This year, the equation is expected to be tilted, with 75% coming in stock, says Alan Johnson, who works with Wall Street companies as they determine how much to pay their employees.
With less cash to spend, bankers will be less inclined to splurge at the high-end stores of Madison Avenue, or go for $20,000 stainless-steel stoves and refrigerators, or vacation at five-star resorts in far-flung locations.
And it wont be a typical year at places like Ferrari Maserati of Central New Jersey, where Wall Street types troop in with their eyes on the prize: a $125,000 Maserati or, if it was a particularly good year, a Ferrari costing $200,000 or more.
After the holidays, after theyve taken care of everyone else, they are ready to take care of themselves. Theyve earned a new toy, says general sales manager Joe Collado. But nowadays if they dont have the same kind of cash flow, they cant spend as much.
Tax collectors in New York stand to lose tens of millions of dollars because deferred stock cant be immediately taxed. That will make it more difficult to plug the states $7 billion budget hole.