Goldman CFO pleads for less focus on bonuses
Only a year after bank’s near-collapse, rewards at Goldman Sachs could beat the 2007 all-time record
As predicted, Goldman Sachs bounced back with excellent third-quarter profits yesterday - $3.19bn, compared with $845m in the same period last year - driven by the strong performance of its trading division.
The bank also confirmed that it had put aside 43 per cent of its third-quarter revenues for staff remuneration. This amounts to $5.4bn, taking the 2009 pay and bonus pool to $16.7bn for the year to date. That is the equivalent of $527,000 per employee for salary, bonus and benefits this year, with one quarter still to go.
As also predicted, the scale of rewards being lined up for the bank's staff by year end has brought howls of protest. Only a year after the bank had to be bailed by American taxpayers when it nearly collapsed in the wake of the Lehman Brothers debacle, the scale of potential staff rewards is such that the bank could even beat its 2007 record compensation pool of $21bn.
As The First Post reported yesterday, whatever the average payout, this will mean millions for some of the company's most senior individuals, such as the London-based European vice-chairman Michael Sherwood.
David Viniar, Goldman's chief financial officer, told reporters yesterday: "We are very aware of what is going on in the world, but we have to trade that off with being fair to our people who, we believe, have performed admirably throughout the crisis."
He said he "would prefer people were focused on the performance of the business" rather than harping on about the bonus money. Needless to say, his plea fell on deaf ears.
WHAT THEY ARE SAYING:Deborah Hargreaves, the Guardian: "With many bankers in the City and on Wall Street heading for bumper earnings a year after the banks were saved from collapse by the taxpayer - that's us - surely we have the right to ask what is happening with our money."
Vince Cable, the Lib Dems' treasury spokesman: "People will be rightly furious to see Goldman Sachs paying out bumper bonuses just 12 months after it was bailed out by the US government. It is farcical that so soon after the reckless greed of bankers brought the world economy to its knees, we are seeing a return to business as usual."
Susanne Craig, the Wall Street Journal: "Goldman navigated the credit crisis better than many of its competitors, but it played a role in causing the meltdown and was forced to take government aid. Goldman also has benefited from the Federal Deposit Insurance Corp.'s debt-guarantee program, which means it and other banks can borrow money at cheaper rates than before."
Alex Brummer, the Daily Mail: "All the high-minded and earnest talk of ushering in a new careful, risk-averse era of banking looks to have vanished in a puff of smoke."
Michael Useem, professor of management at the Wharton School at the University of Pennsylvania, quoted in the New York Times: "They do it [reward staff] because they can. But strategic thinking requires that you think not only about trading but also about reputation and where the bank stands in the court of public opinion."
Comments are now closed on this article