Business

Goldman: Pay and bonuses of £269,000 per head

BBC business editor Robert Peston on bankers' payouts

The story at Goldman Sachs is that net earnings have fallen by a considerable amount, 38%, to $8.4bn (£5.3bn), and net revenues have dropped by 13% to $39.2bn (24.5bn)

But "compensation and benefits" (largely pay and bonuses for staff) has been reduced just 5% to $15.4bn. The ratio of compensation to revenues has risen from 36% to 39%.

Which some will see as the bankers doing considerably better out of the firm than the owners.

That said, 39% of revenue is still lower than Goldman has often allocated to pay and bonuses in the past (which is what I'm sure they'll say when they ring me about this post - so perhaps I am saving Goldman the cost of a phone call).

Average pay per head (which includes bonuses) for Goldman's 35,700 employees was $431,000 (£269,000) for 2010. So less than last year's $495,000 but - most would say - not too shoddy.

And remember that this figure for average pay should not be seen as saying anything terribly informative about typical pay at the firm, because variations in rewards are so pronounced. At the top, there are 475 partners who take home millions of dollars each year.

Also, in addition to the remuneration disclosed today, Goldman's executives have shared a $3.5bn windfall from stock options granted to staff at the end of the 2008, according to an analysis published in today's New York Times.

What does it all mean?

First, the substantial rewards for Goldman's people will reinforce the case of the boards of Barclays and Royal Bank of Scotland that they too must pay big bonuses - or risk seeing their better people defect.

Second, it is pretty clear that Goldman has come through a turbulent year in good shape (including ending 2010 with a ratio of equity capital of 13.3% under the old rules - which makes its balance sheet reasonably robust, though not an absolutely unbreakable fortress, to use the cliche).

Note that this is the year when Goldman paid $550m to the US regulator, the Securities and Exchange Commission, to settle a case of alleged fraud in the sale of an issue of collateralised debt obligations - and when it was pilloried by many senior members of Congress for perceived shortcomings in the way it conducts business.

It was the year when Goldman paid $465m in a one-off bonus tax to the UK exchequer.

And 2010 was the year in which it had to start reconstructing its business in a fundamental way, to eliminate some of the conflicts of interest perceived by its critics and to get out of proprietary trading (which has historically been very important to Goldman, but which has been banned for banks by a US reform known as the Volcker rule).

So many would say that the rise in Goldman's share price over the past year, and its continued claim to be the global leader in investment banking (albeit facing stiffer competition from the likes of JP Morgan, Morgan Stanley and Barclays Capital) is no mean achievement.

That said a few of you would probably argue that the Goldman hegemony is great for Goldman partners, though not necessarily for the world.

Update 1620: I thought you might find these two responses to my post diverting.

The first is from Goldman Sachs:

"You might note that comp and benefits per employee (at £269,000) fell 14% year on year, in line with the decline in revenue. The reason total comp wasn't down in line with this is that we increased headcount by 10% over the past year, or an increase of 3,200 people, mainly in Growth Markets, Investment Management and Technology."

The second is from a City chum:

"The top 20% in an investment bank scoop 80% of the pot, so the more interesting number is £1.3m per head for the bankers (as opposed to the doormen, security guards, receptionists, waiters, cooks, electricians, personal assistants, IT staff, accountants and researchers etc etc). And on the basis of an 80/20 split of that pool, there was £5m plus for the 220-odd senior folk in London."

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

More on this story

Around the BBC