High-flying Goldman sees wage bill double to $8.7bn
Wednesday 22 December 1999
The wages figure, unveiled yesterday, works out at about $580,000 for each of the firm's 15,000 employees worldwide, although the lion's share will have gone to the 694 managing directors, dozens of whom will each have received $10m or more this year.
The managing directors replaced the partners as the firm's elite when it went public in a $25bn flotation in May. Since Goldman came to the market its shares have soared 50 per cent to about $80 yesterday, taking the market capitalisation to $38bn. Most of the benefit of the share price rise will also have gone to employees, who hold the majority share of stock in the firm.
The $8.7bn figure for total compensation in 1999 includes $2.26bn of shares paid out to employees at the time of the initial public offering. But even when that is stripped out the salary bill, including bonuses and benefits, still totals $6.46bn, a rise of 68 per cent on the $3.8bn paid to staff in 1998.
Normally about two-thirds of total compensation is paid out in the form of bonuses, part of which will, for the first time this year, be distributed as shares.
The firm refused to give a breakdown of remuneration by geographical area. However, the European business, which is run out of London, is the fastest-growing area of Goldman Sachs, accounting for 27 per cent of $4.4bn investment banking revenues worldwide.
It is also likely to be the area in which some of the most generous pay- outs will have been made. European revenues are growing year-on-year by 65 per cent, with Goldman having successfully supplanted the majority of home-grown companies in their traditional markets in the UK and Europe.
Hank Paulson, the chairman and chief executive, said yesterday: "The firm's financial performance demonstrates the power of our global franchise and the benefit of our continuing focus on serving the needs of clients."
As well as topping the league tables for merger and advisory business globally, the firm was number one in equity underwriting, both in the United States and worldwide.
Profits before tax when the one-off effect of the IPO are stripped out came in at $4.25bn - more than double the $2.13bn chalked up in 1998, when the firm was badly hit by trading losses in the third quarter following the rescue of Long Term Capital Management, the hedge fund.
The upset led to the firm's IPO being postponed, and Jon Corzine, Goldman's leading partner who came from the trading side of the firm, quitting to go into politics.
Earnings in the fourth quarter to the end of November were $756m, up from 18 per cent in the previous quarter. In the fourth quarter in 1998 the company's published losses were $671m.
A 14 per fall in trading revenue, as bond market activity declined because of Y2K computer concerns, has been more than compensated for by strong growth on the advisory side thanks to record deal flows.
David Viniar, chief financial officer, said the firm was aiming to shrink the proportion of the business accounted for by volatile proprietary trading by growing investment banking and asset management more rapidly.
He said that the next quarter also promised to be good. "The backlog across the board in investment banking is up 50 per cent up from last year," he added.
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