GOLDMAN: OUR STAFF DESERVE EVERY PENNY
THE boss of Goldman Sachs yesterday defended the bank’s pay policies, insisting his staff were paid more because they were “among the most productive in the world”.
Lloyd Blankfein, Goldman’s chair and chief executive, also rejected calls to break up the bank and said the firm was easier to manage than its larger rivals.
“I often hear references to higher compensation at Goldman,” Blankfein told a banker’s conference in New York.
“What people fail to mention is that net income generated per head is a multiple of our peer average. The people of Goldman Sachs are among the most productive in the world.”
The comments show that Goldman is prepared to launch a vigorous fightback against critics who believe that it pays its bankers too much. Its approach is in stark contrast to other firms that have chosen instead to go to ground.
Goldman is expected to pay out an average of $650,000 (£388,100) in compensation to each of its 30,000 employees this year. This would match its bumper bonus year of 2007.
But Blankfein said Goldman, the most profitable securities firm in Wall Street history, had “established a prudent culture of risk management”.
Since 2000, overall compensation at Goldman represented just 46.7 per cent of revenues compared with 52.1 per cent at its rivals, Blankfein said.
Goldman’s pre-tax profit margins, at 29 per cent, were 10 percentage points higher than the average for other financial firms in the Fortune 500 this decade, he added.
“These are profits that go to shareholders after we pay our people,” Blankfein said. “Our shareholders are pensioners, mutual funds and institutional investors, and they are all taxpayers.”
The average annual earnings returned to shareholders, per employee, totalled $196,004, compared with $79,962 at the other banks, Blankfein said.
Even though Goldman converted to a bank-holding company last year, it has stuck to its investment-banking business model focused on advising, financing and investing, Blankfein added.
“Most of the activities we do, and you can be confused if you read the pop press, serve a real purpose,” Blankfein said, adding it wouldn’t “be better for the world or the financial system” to change the firm’s activities.
“Our business is very complex, and I won’t deny that, but it’s far, far simpler than most of the competitors,” he added. “I wonder myself how some of these things get managed.”
The Federal Reserve is proposing to limit incentive pay and bonuses at US-regulated banks in order to promote financial stability. The proposals offer guidance for compliance rather than specific pay caps or targets for bonuses.
Blankfein said “for the most part the proposals that have been offered are not really conflicting with our view”.