Goldman Bonus Rumor: Dark Window on 2008?

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A rumor that Goldman Sachs stiffed back-office staff on bonuses suggests Wall Street's troubles - and near-term career prospects - are even worse than they appear.

The rumor might be bogus. The New York Post, which first reported it, backed away after a London-based Goldman spokesman called the paper's story "nonsense" and said the bank "took great care to reward our people appropriately'' for "a very strong year." The Post Sunday business editor responsible for the story subsequently explained to Bloomberg, "That was a single item in a column that is a gossip column, which is distinct and very different from a news story.''

If accurate, the story is further evidence that managements view the back-office and IT professionals as interchangeable commodities wholly lacking in bargaining power. It's also a sobering reminder that discretionary bonus decisions are driven more by next year's outlook than last year's results - and 2008 may be looking ugly even in the eyes of Goldman Sachs.

According to the article in Sunday's New York Post, "cost center workers" who looked forward to bonuses of 75 percent of base, based on what they received for 2006, instead got only 15 percent.

The articles go on to contrast the rumored stiffing of Goldman's lower caste with the rewards lavished on its top three executives, the 23 percent jump in company-wide compensation expense for 2007, and the $661,500 average pay per employee.

As we've often pointed out, average pay per employee may be a useful statistic for analysts or shareholders concerned about a company's cost structure, but it's of little use as a reference point for candidates. The reason: Most of the total payout is concentrated within the upper layers of senior management and star producers.

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