Goldman pay article updated with management commentary, share price.
NEW YORK (
(GS - Get Report)
cut compensation costs and expenses more than expected in the fourth quarter, helping the investment bank beat analyst expectations by a wide margin.
Compensation as a percentage of revenues rose to 36.5% in the fourth quarter compared to 26% in the corresponding quarter of the previous year.
Although the ratio rose in the fourth quarter compared to a year earlier, it appears Goldman has managed compensation expenses better than what analysts were expecting.
Goldman has historically had a fourth-quarter compensation "true-up", a practice where it accrues compensation expenses at a standard rate in the first three quarters and then adjusts its compensation relative to revenues in the final quarter to reflect actual expenses.
Often, especially in a good year, the fourth quarter compensation- to- revenue ratio is significantly lower than earlier quarters, helping to boost profits.
Analysts had predicted that Goldman might have far less flexibility to make major adjustments to compensation this time around, given competitive pressures. Wells Fargo analyst Matt Burnell, for instance, had expected the compensation- to- revenue ratio to stay at about 44% in the fourth quarter.
However, Goldman laid off 900 employees in the fourth quarter, more than anticipated, with total staff at the end of the fourth quarter standing at 33,300(34,700 on a consolidated basis.)
CFO David Viniar also said on the analyst conference call that the firm had made significant cuts to variable compensation- read bonuses- to drive down expenses.
| Goldman Sachs CEO and Chairman Lloyd Blankfein
For the entire year, Goldman set aside $12.2 billion towards compensation expenses or 42.4% of revenues. That is down 21% from the amount set aside in 2010.
The investment bank's 34,700 employees (includes staff at consolidated entities) earned an average compensation of about $352,248 in 2011. That is down 11% from 2010, when the firm's 38,700 employees earned an average salary of $397,312.
The average compensation is computed by dividing total compensation expenses by the number of employees on staff at the end of the year on a consolidated basis. The averages are, of course, skewed by eye-popping bonuses paid out to the company's partners.