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Monday, November 2, 2009

Goldman Sachs Compensation Package

Who would've ever thought that a Wall Street bank would have a dilemma over too much money? Now that Goldman Sachs Group Inc. (NYSE:GS) has blown away its third-quarter profit estimates, talk has turned to the boatloads of money the bank is expected to hand out in bonuses at year's end -- and the backlash that's likely to follow.

Thus far this year, Goldman has already set aside $16.7 billion for compensation, roughly 46% more than it did in the first three months of 2008, and just below the record amount of $16.9 billion set aside for the same period in 2007. So far the bonus pool is high enough to pay each Goldman employee $527,192 for the period, according to Bloomberg. Of course, all that bonus won't be divvied up equally, as John Carney wrote earlier this year.

* Goldman's senior executives -- known as PMDs for partner managing directors -- slice off a huge chunk of the revenue. In 2007, the top guys took around 20% of the total. This means that if compensation comes in at $20 billion this year, that's $4 billion for Goldman's 400 or so PMDs. If these guys and gals divided the money evenly, each PMD would take home a cool $10 million each.

* The guys who find the most favor with the compensation gods will likely take somewhere between $20 million to $40 million. Goldman has to disclose what they pay the executive management team -- guys like Lloyd Blankfein and CFO David Viniar.

* The next level down at Goldman are the executive managing directors. These are folks who didn't get tapped to join the inner circle of the partnership, but have been at the firm a long time or control a good book of business. They can probably expect to make somewhere between $2 million and $4 million a piece.

* The rest of Goldman's financial employees--the vice presidents, associates and analysts -- get paid according to their performance evaluations

However the bonus pie gets sliced up, the total size is what critics will be keying in on. There's a line of critics around the block formed by those who are already gearing up for a fresh round of Goldman-hating, something the bank's management and public relations department are working overtime to blunt.

The latest rumor is that Goldman will make a $1 billion donation to charity, something that hard-pressed charities would welcome with open arms. However, a charitable contribution, particularly one of that size, could backfire and leave Goldman open to charges of an attempt to buy good will.

Critics will also be digging up quotes from Goldman's own CEO Lloyd Blankfein, who's had much to say on Wall Street compensation this year. In September, Blankfein said that "compensation continues to generate controversy and anger. And, in many respects, much of it is understandable and appropriate."

Still, the answer may be that Goldman will just have to pay the bonuses and weather the storm since the employees that made all that money for the firm are likely to insist on what they see as their fair share of income. And while Goldman is sure to get plenty of heat over bonuses, it won't be alone. The 23 largest financial institutions in the U.S. are on track to pay employees $140 billion in aggregate this year, a record high, The Wall Street Journal reported Wednesday, inciting outrage among readers. - George White


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