This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Goldman Sachs Saves Quarter by Slashing Pay (Update1)

Goldman pay article updated with management commentary, share price.

NEW YORK ( TheStreet) -- Goldman Sachs (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.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
C $53.26 -0.34%
GS $187.79 -0.41%
JPM $64.11 -0.57%
MS $34.05 -0.73%
AAPL $113.29 0.33%

Markets

Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs