Goldman's Bonus Plan Draws More Fire

Goldman avoided (and actually profited from) the subprime housing mess; was one of the first major banks to repay bailout funds; has reported rockstar profits this year to the tune of $7.4 billion; and its stock has responded accordingly, up more than 200% in the past 52 weeks. The company has already revised compensation practices to align them better with stock performance, but that doesn't seem likely to reduce the dollar amount of bonuses: Goldman is on track to pay employees $23 billion in awards, the largest in its history.

The Journal says stockholders are critical of a couple of points. First, because Goldman has issued 100 million new shares to bolster its capital position throughout the financial storm, even if its earnings surge, per-share profits will be lower than the levels seen prior to the crisis.

And secondly, just as per-share profits track lower, per-employee revenue is muddled by the addition of temporary workers and consultants in the firm's overall employee figures. Goldman began counting those employees in the second quarter. The difference would boost per-employee compensation from $717,000 to $775,000 if those that aren't permanent, full-time workers are excluded.

One large shareholder, Tom Marsico, told the Journal that he'd be surprised if the firm boosted bonus payments, but asserts that the issue comes down to "how Goldman and other firms can best allocate capital." But another factor is probably playing a role in investor discord as well: Pure gumption. It looks bad to make a lot of money and boost bonuses as others in the market and broader economy are suffering.

The negative attention is weighing down Goldman in terms of public perception and how the government may or may not respond. (Goldman had protestors outside of its Washington, D.C., office this week.) While reputation is an intangible item that's hard to quantify in relation to stock price, it certainly is a factor.

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