Goldman Sachs Group set aside a record $US11.4 billion ($14 billion) for compensation and benefits in the first half of 2009, up 33 per cent from a year earlier and enough to pay each worker $US386,429 for the period.
The figures were released today with the firm's record second-quarter earnings results. Revenue jumped 31 per cent to $US23.19 billion in the first half and the New York-based firm set aside 49 per cent to cover its largest expense, compensation and benefits.
After setting a Wall Street profit and pay record in 2007, Goldman Sachs cut compensation 46 per cent last year as the financial crisis slashed revenue and the firm accepted government support. Goldman Sachs repaid $US10 billion and dividends to the US Treasury last month, freeing itself from restrictions on year-end bonuses. Even so, a compensation bonanza at a company that received taxpayer support risks stoking political anger with the US economy in recession.
''The question becomes how does this all play politically? This could be a political explosion,'' said Eliot Spitzer, the former governor of New York, in an interview before the results were released. The general public may think ''suddenly they're back making their bonuses and we're unemployed. And you know what? The public is right.''
While some lawmakers voiced outrage at the compensation, others said they thought the company had a right to pay employees as it sees fit now that Goldman Sachs has returned the government's $US10 billion investment.
Private companies
''What the private sector does without government money is one thing,'' said Robert Menendez, a Democratic Senator from New Jersey. ''What the private sector does with government money is another thing.''
For the first time, Goldman Sachs reported staff numbers including consultants and temporary staff instead of just full- time employees. Based on the new method, the number of workers fell to 29,400 from 29,800 at the end of March, Goldman Sachs said. The number of full-time employees at the end of March had previously been reported as 27,898.
In the first six months of fiscal 2008, Goldman Sachs set aside $US8.52 billion, or an average of $US270,614 per employee. In the same period of 2007, a year in which the firm set a Wall Street pay record, the firm allocated $US11 billion for compensation and benefits.
2009 predictions
Guy Moszkowski, an analyst at Bank of America Corp. in New York, estimated last week that Goldman Sachs's compensation may jump 64 per cent from 2008 to $US17.9 billion this year, which is still below the record $US20.2 billion in 2007. He also predicted that the firm may beat its record by paying employees $US20.36 billion in 2010.
Chief Executive Officer Lloyd Blankfein, who agreed not to take a bonus last year after being awarded a record-setting $US68.5 million in salary and bonus for 2007, said in an April speech that the industry's compensation decisions before the crisis ''look greedy and self-serving in hindsight.''
''I wouldn't be surprised if there's some sort of a backlash,'' said William Fitzpatrick, an equity analyst at Optique Capital Management, which manages $US900 million, including Goldman shares, in Racine, Wisconsin. ''But if you're Goldman, you're in good shape here in the sense that there's not a whole lot they can do to enforce any sort of compensation restrictions.''
Pay principles
At Goldman Sachs's annual shareholder meeting in May, Blankfein, 54, read a three-page statement outlining the company's ''compensation principles.'' They include avoiding multiyear guarantees, increasing the restricted stock portion of pay as an employee's compensation increases, and ensuring that pay isn't linked solely to individual risk-taking.
A month later, US Treasury Secretary Timothy Geithner also proposed a set of ''broad-based principles'' for the industry that try to align pay with sound risk management and long-term growth.
''We are not capping pay,'' Geithner said in his June 10 statement. ''We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive.''
