Fury as Goldman Sachs unveils bankers' pay
An increased proportion of revenue is to be dished out to senior staff next week
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Sunday 15 January 2012
Goldman Sachs will stoke the fury over bankers' bonuses this week when it increases the proportion of revenues paid to staff despite what could be its worst year for earnings since 1999.
The bank – which will report its final results for 2011 on Wednesday – has already set aside 44 per cent of the $22.76bn (£14.89bn) of revenues it generated during the first nine months of the year to pay staff. The lion's share will be shared by a small number of elite level "partners".
If pay remains at that level in the fourth quarter, the final compensation ratio will show a significant rise over the 39.3 per cent of revenues handed out by Goldman in 2010, when the total pay out was $15.38bn.
Although the average salary for the first nine months enjoyed by Goldman employees is down to $292,397 from $370.056 in the first three quarters of 2010, that the bankers' share of revenue is rising will anger critics.
This would counter banking industry arguments that remuneration policies are set up to reward those who generate good performance for all the bank's shareholders rather than just to keep senior staff in the manner to which they have become accustomed.
Analysts expect Goldman's final numbers to show a 62 per cent fall in earnings per share when compared to last year.
Speaking to the New York Times' Dealbook blog, Mike Mayo, an analyst with brokerage CLSA, said: "In the tug of war between employees and shareholders, the employees are winning."
Mr Mayo also said that Wall Street has its own 99 per cent and 1 per cent with those at the very top commanding the vast majority of bonus pools. Partners at Goldman could still enjoy packages of $3m or more, despite what might be the poorest 12 months for earnings since the bank floated on the New York Stock Exchange 13 years ago.
On this side of the Atlantic, the TUC's general secretary Brendan Barber said: "And so the bonus season is upon us again. This is the time of year when ordinary people discover that the bankers in the City – whose irresponsible behaviour and reckless risk-taking led to the global crash – are yet again to enjoy a bonus extravaganza."
Mr Barber called on the Government to "move beyond the rhetoric over top pay" and make bonuses above £260,000 liable for corporation tax. He also called for the re-introduction of a tax on bankers' bonuses. The previous government introduced a one-off banking "pay roll tax" aimed at bumper bonus payments.
Not all banks have made such huge payouts. On Friday, JP Morgan kicked of the banking reporting season and cut its investment bank's compensation ratio to 34 per cent from 35 per cent in 2010. In contrast to Goldman, its revenue was flat at $26.274bn compared to $26.217bn. Overall, profits increased by 9 per cent, although they fell by 22 per cent in the fourth quarter.
The bank's head count fell to 25,999 against 26,314 putting the average salary at about $342,000 compared with $369,000 the previous year.
Goldman has also cut staff beyond a regular yearly cull of those rated as poor perfomers.
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