Goldman Sachs reported record earnings on Thursday.þþBut in reaction to the public outcry over executive compensation, the bank reduced the share of revenue going to bonuses.þþThe bank said that for 2009, it earned a profit of $13.4 billion on revenue of $45.2 billion. For the fourth quarter, Goldman earned $4.95 billion on $9.6 billion in revenue. þþThe earnings of $8.20 a share easily beat analysts’ expectations of about $5.20 a share and compared with a loss of $2.12 billion, or $4.97 a share, in the quarter a year earlier.þþThe bank also disclosed that it had set aside $16.2 billion for bonuses and compensation for its employees in 2009. This was below the record year of 2007, when it devoted $20.2 billion to bonuses and salaries. þþThe figure for 2009 represented 35.8 percent of revenues, down from 48 percent in 2008, and its lowest ratio since it became a public company. And in a sign that Goldman is being swayed by the public outcry over high levels of executive compensation, the bank took money out of its bonus pool in the fourth quarter to pay for its charitable and small business initiatives. þþNevertheless, on average, each Goldman employee is set to receive around $498,000 in bonus and compensation for 2009, an amount that could still incense the bank’s critics, given the economic pain elsewhere in the country.þþIn a statement, Lloyd C. Blankfein, chairman and chief executive, highlighted the firm’s reduction in its compensation pool as a share of revenue. He said the firm’s strong performance “as well as recognition of the broader environment, resulted in our lowest ever compensation to net revenues ratio.”þþThe results overall underline how much Goldman has rebounded from the financial crisis and its single quarterly loss in the final three months of 2008. Its disclosure on bonuses underlines the extent to which compensation will again eat up much of Wall Street’s revenue this year.þþResponding somewhat to the criticism over its pay practices, Goldman had already begun decreasing the share of revenue that it pays to employees. The bank set aside 50 percent in the first quarter, but that figure fell to 48 percent and then to 43 percent in the next two quarters. For the entire year, the figure came in at 35.8 percent.þþIn December, Goldman announced that its top 30 executives would be paid only in stock, with no cash component. Now, nearly everyone on Wall Street is waiting to see how much stock will be awarded to Mr. Blankfein, who has become a focus for criticism over executive pay. In 2007, Mr. Blankfein was paid $68 million, a Wall Street record. He did not receive a bonus in 2008.þþDetails of Mr. Blankfein’s stock award may emerge this week, although some Wall Street executives say the disclosure of who gets what from Goldman’s bonus pool could be delayed until later this month.þþDespite Goldman’s reduction of its bonus pool in the final three months, the numbers may still provoke more outcry over the level of executive pay on Wall Street, a year after the government rescued the financial system with billions of taxpayers’ dollars.þþMany banks are bracing for more scrutiny from Washington, as well as from officials like Andrew M. Cuomo, the attorney general of New York, who last year demanded that banks disclose details about their bonus payments. Some bankers worry that the United States, like Britain, might create an extra tax on bank bonuses.þþBut these concerns aside, few banks are taking immediate steps to cut their bonuses substantially. Because of the potential criticism, some big banks are changing their pay practices, paring or even eliminating some cash bonuses in favor of stock awards and reducing the portion of their revenue earmarked for pay.þþSince the financial crisis, all Wall Street banks have benefited from an array of federal programs and low interest rate policies that enabled the industry to roar back in profitability in 2009.þþAs most big banks have started repaying the billions of dollars in federal aid that propped them up during the crisis, the power that the federal government once had over banker pay has waned.þþTo Wall Street critics and, indeed, many ordinary Americans, the prospect of a new era of Wall Street wealth, so soon after the financial collapse, and with so many people out of work, seems shocking.þþSome see the current round of bonuses as evidence that Washington policy makers failed to reform pay practices that in, some cases, fostered the risky businesses that lead to the financial crisis in the first place.þþThough Wall Street bankers and traders earn six-figure base salaries, they generally receive most of their pay as bonuses based on the previous year’s performance. While average bonuses are expected to hover around half a million dollars, they will not be evenly distributed across the banks. Senior banking executives and top Wall Street producers expect to reap millions. Goldman put aside $16.7 billion for compensation during the first nine months of 2009. Goldman’s compensation ratio was 47 percent for the first nine months of the year. It earned a profit of $3.19 billion in the third quarter.þ
Source: NY Times
