Goldman Sachs reported “better than expected” 2009 earnings today. That translates to $13.4 billion for 2009, and $16.2 billion in compensation, mostly for year-end bonuses. The Washington Post has details:
The compensation pool — which includes salary and benefits but is largely for year-end bonuses — translates to an average payout of $498,000 per employee, although rainmaker traders and bankers will earn millions. The average pay amount is up 37 percent from 2008, although lower than the pre-crisis level in 2007.
Compensation at large banks has been under intense public scrutiny as the country struggles with double-digit unemployment rate in the wake of an economic crisis that many lawmakers contend was fanned by excessive risk-taking on Wall Street. That the average Goldman employee will pocket half a million dollars is sure to draw additional fire, and the firm sought to play down the figure.
Goldman noted that its compensation pool represented 36 percent of its revenue, the lowest ratio since it became a public company in 1999. Last year, Goldman set aside 49 percent of its revenue for compensation and benefits, which is typical for the industry.
During the first three quarters of the year, Goldman had accrued $16.7 billion in its compensation pool, setting it on track to pay out bonuses that would have rivaled payouts in 2007. But in a reversal, it took out $519 million from the compensation funds in the final three months of the year. In December, as public criticism mounted over expected payouts, Goldman announced it was contributing $500 million to charitable and small business initiatives. Goldman also said its top 30 executives would be paid 2009 bonuses fully in restricted shares, not cash.
I don’t see how anyone can claim official “expectations” for Goldman Sachs anymore. They’re backpedaling because of bad PR, and probably government pressure. Moreover, they made 2/3 of their revenues from trading (GS is rumored to manipulate markets). No big financial firm should be beholden to anything resembling normal expectations right now, especially not Goldman Sachs. Zero Hedge breaks it down:
…employee compensation accrual…went down from an annualized accrual of $20 billion previously to $16.193 billion for FYE 2009. In fact in Q4, Goldman reported a negative expense to compensation and benefits of ($519) million compared to $5.351 billion in Q3. Did Rahm have some tete-a-tetes with Lloyd recently?
Despite making investors happy, I don’t think Blankfein’s PR-improvement push is working very well.