The News: Owners Press Goldman to Cut Pay?

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Are complaints that Goldman Sachs overpays its employees finally trickling from Main Street up to Wall Street?

Yes, says Friday's Wall Street Journal. Some of the firm's largest shareholders have urged Goldman to reduce the size of its bonus pool, the paper reports. "Their complaints in private conversations with the company and at analyst meetings show how anger over its big-money culture is spilling into the ranks of investors who typically shy away from debates over Wall Street pay."

At least one banking analyst, Calyon's Michael Mayo, also told the Journal that reducing the bonus pool would benefit shareholders, the government and even employees, who collectively own 10 - 15 percent of Goldman shares. That's because smaller payouts to staff could push up the stock price by boosting earnings per share, which are expected to come in well below 2007's level.

I think the WSJ's treatment overstates similarities between shareholders' complaints and those voiced by the mass of Americans. It's unlikely that fund managers such as Tom Marsico (whose Marsico Capital Management owns 10.6 million Goldman shares, and is quoted in the story) would ever carry a "Jail the Greedy Banksters!" placard, even figuratively. Indeed, Marsico told the paper the compensation debate shouldn't be framed as "a populist issue, (but) is really about how Goldman and other firms can best allocate capital and how pending changes in the regulatory framework may change all this." That sounds more like the kind of reasoned, consensus-based compensation reform that a number of Wall Street CEOs have advocated, even before the crisis.

The story also notes - buried "below the fold" (in newsman's jargon) - that the large shareholders aren't pushing for a "huge" downsizing of the bonus pool. It further acknowledges that if Goldman violates employees' expectation of being rewarded in line with performance, talented people may leave, which wouldn't necessarily benefit shareholders. For its part, the bank says its shares have returned 159 percent since going public in 1999, compared with a -2.1 percent cumulative return for the S&P 500 index.

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