Goldman Sets Aside $542,000 Per Employee, Beats 2005 (Update3)
By Adrian Cox
Sept. 12 (Bloomberg) -- Goldman Sachs Group Inc. set aside an average of $542,000 in pay per employee so far this year, already beating its total for the whole of 2005, after earnings in the first three quarters reached a Wall Street record.
The firm allocated $13.9 billion for salaries, bonuses and benefits for its 25,647 employees through the end of the fiscal third quarter, 19 percent more than it paid all of last year, according to Goldman's earnings report today. Investment banks dedicate about half of their revenue to pay employees, holding back most of it for year-end bonuses.
Wall Street bonuses are set to jump 15 percent this year, with investment bankers and traders getting the biggest windfalls, New York compensation consult Johnson Associates Inc. said last month. The payments tend to vary from less than $50,000 for junior analysts, the biggest group at most firms, to $5 million or more for a handful of star traders and top bankers.
``Goldman is usually the gold standard that the other firms have for evaluating their own performance,'' said Gary Goldstein, chief executive of the New York-based Whitney Group, an executive recruiter. ``They're much bigger risk-takers. They do a lot of proprietary trading, which requires less personnel.''
Goldman's $6.39 billion in net income for the first nine months of fiscal 2006 beat its own full-year profit record, posted last year. The firm's revenue of $27.9 billion for the period topped the previous annual high, set by Morgan Stanley in 2005. Goldman reported gains of more than 50 percent each in fixed-income and equities trading, investment banking and asset management.
Highest on Wall Street
Morgan Stanley, the biggest securities firm by market value, and Merrill Lynch & Co., which owns the largest brokerage, both have twice as many employees as Goldman, though earn less. Goldman's pay per employee in 2005 was $521,000, compared with $315,000 at Lehman Brothers Holdings Inc., $300,000 at Bear Stearns Cos., $228,000 at Merrill and $213,000 at Morgan Stanley. All the firms are based in New York.
Goldstein said ``a significant number'' of Goldman's employees will earn less than the firm's average pay.
The top five Goldman executives whose compensation for 2005 was disclosed publicly, including new Chief Executive Officer Lloyd Blankfein, 51, and his predecessor Henry Paulson, 60, were paid a combined $143 million.
Accounting Change
Goldman, the No. 2 securities firm by market value, set aside a larger share of revenue in the first nine months of this year, partly because of a change in accounting rules for stock- based pay. Goldman paid out about 47 percent of revenue as compensation in each the past four years.
The firm benefited this year from rising stock and commodities markets and record share sales and takeovers. Goldman said today that earnings for the three months ended Aug. 25 beat analysts' estimates for a third straight quarter. Net income fell 1.4 percent to $1.59 billion, or $3.26 a share.
``Wall Street revenues were very strong in the first two quarters of this year, and that will drive compensation higher than last year to record levels,'' said Michael Karp, chief executive officer of Options Group, a New York-based executive search firm. ``Competition within banks for talent will also make pay go higher as everyone gears up for next year.''
Goldman was the first of the major Wall Street firms to report third-quarter earnings. Lehman reports tomorrow, followed by Bear Stearns and Morgan Stanley.
London Survey
A survey by the recruiting firm Morgan McKinley showed today that about half of bankers in London expect their bonuses to rise by at least 50 percent, with about a quarter expecting the payments to more than double. According to the survey, dissatisfaction with last year's bonuses is widespread, and only a quarter of respondents said they would stay in their jobs if this year's bonuses fail to meet their expectations.
``The investment banks are increasingly aware that the bonus season can act both as a key retention tool and as a very good marketing device to attract potential employees for the future,'' said John Hunter, chief operating officer of London-based recruitment firm Imprint Plc, Morgan McKinley's parent company. ``This has clearly been a very good year. |
