Goldman Slashes 'Partner' Compensation
Goldman Sachs' 440 partner managing directors reportedly face a $400,000 cap on cash bonuses this year and their full packages comprising cash, stock and options are set to shrink as much 80 percent from last year's level.
The equity portion of partners' compensation packages will be paid half in stock and half in options, the Financial Times reports.
Less than one in four managing directors at Goldman holds the rank of partner. They comprise the top layer of rainmakers, who enjoy the lion's share of the company-wide bonus pool during good times. In a typical year, their payouts range from $3 million to as much as $20 million for those with the highest levels of seniority and responsibility, according to the FT.
Goldman outperformed most rival banks in 2008 and earned a profit for the full year, despite posting its first quarterly loss since going public nine years ago. However, the FT notes, "during difficult times, partners are expected to take the biggest hit to reward and retain bankers who rank below them."
The bank announced last month that Chief Executive Lloyd Blankfein and his top six deputies won't be paid bonuses for 2008.
Negative Revenue for Q4
In its fourth-quarter income statement released this week, Goldman deducted $490 million from compensation expenses it had accrued over the previous nine months of fiscal 2008, reflecting losses from trading and a steep downturn in investment banking revenue. Compensation and benefits expenses for the full year came in at $10.93 billion - 46 percent lower than in 2007.
The decline stems from "lower levels of discretionary compensation due to lower net revenues," Goldman said when announcing the results Tuesday. "Discretionary compensation" is a synonym for "bonuses."
Revenue for the fiscal year ended Nov. 28 shriveled to $22.2 billion from $46.0billion in 2007. In the fourth quarter the bank reported a net loss of $2.1 billion on negative net revenue of $1.58 billion, reflecting net losses from trading and principal investments.
The 2008 compensation and benefits total averages out to $363,521 for each of the bank's 30,067 employees at year-end. That compares with an average $661,490 per Goldman employee in 2007, a decline of 45 percent. Of course, due to an upwardly skewed pay structure, most employees earned less than the average, while a sizable minority earned much more.
Predictably, word of the shrunken bonus pool failed to satisfy the online peanut gallery. Comment posted beneath a New York Times report on Goldman's fourth-quarter results ran overwhelmingly against Goldman paying any bonuses at all. "Pay the U.S. taxpayer back before anyone gets a bonus," one post urged. Another post concluded with this gem: "Homeowners, even those not involved in the recent bubble, have seen home values decline. We didn't do ANYTHING to contribute to the mess, and our wealth has been reduced."