Employees at Goldman Sachs have more reasons to cheer than just the surprisingly positive earnings report for the second quarter of 2009. The firm is now preparing to pay its employees more than ever.
Goldman is not only earning money from trading that rivals its record years during the housing boom, it is also increasing the percentage it sets aside for compensation. In the past, Goldman could point out that despite record bonuses, its compensation was actually below the industry average when measured against its revenue. In 2007, its compensation-to-revenue ratio was 43.9 per cent, well below the 49 per cent that was generally considered the standard for bulge-bracket firms. Bank of American analyst Guy Moszkowski estimated that this year the the firm would set aside 44.2 per cent of total revenue to pay compensation and benefits.
But Goldman beat expectations here too. It’s compensation revenue has shot up to 49%. That means that Goldman shareholders are paying more than ever for their talent.
What’s more, Goldman’s workforce is actually 1% smaller than it was last year. Fewer people with a higher compensation revenue, means that those folks at Goldman are having the best year ever.
Estimates prior to this morning’s earnings had Goldman paying out nearly $18 billion in compensation. But that was at the old, more modest compensation ratio. Now Goldman’s final compensation levels could rival any past year, topping $20 billion and more than doubling last year.
Of course, Goldman doesn’t make its final compensation decisions until much later in the year. A bad quarter or two could turn things around. But right now, this is what Goldman expects to pay out. And if you are a Goldman employee, it looks like it is a very good year.
Business Insider Emails & Alerts
Site highlights each day to your inbox.