Sorry Lloyd, but productivity may not be a justification
If Lloyd Blankfein is to be believed, Goldman employees deserve every penny of this year's lavish bonus payouts because they are "among the most productive in the world". The justification, he says, is that net income generated per head is "a multiple of our peer average". But is this really the case?
The chart below, based on net income divided by number of employees, shows that, in dollar terms, Deutsche Bank corporate and investment banking staff are the most profitable, with a net income per head of $395k for the first nine months of fiscal 2009, followed by Credit Suisse's investment bank, which generated around $300k per person for the same period.
The 31,700 Goldman staff, meanwhile, have produced a net income per head of $266k for the first nine months of this year. JPMorgan's investment bank is also competitive with an average per head of $201k.
Deutsche Bank figures are for corporate and investment bank, Credit Suisse is for investment banking, while Goldman Sachs represents performance of entire organisation.
At the other end of the spectrum, rather predictably, is UBS. The 16,130 staff in its investment banking division generated a net income per head of -$396k to September 2009. This doesn't tell the whole story though - despite the now underlying profitability of the investment bank, ongoing credit charges continue to hit the bottom line.
If it were possible to split out income per head of Goldman's advisory and trading operations, its income per head would undoubtedly higher. Unfortunately, the bank doesn't make this distinction.
If this were the case, however, pay per head at Goldman would also increase dramatically. As things stand, figures for mean compensation per head across the firm as a whole suggest the average Goldman Sachs employee received nearly 25% more than the average Deutsche corporate banking and markets professional in the first nine months of this year. This was despite net income per head being nearly 50% higher at Deutsche.
