Goldman Sachs Shareholders Ask Bank To Cut Down HUGE Bonuses

Think of it as an atypical example of "shareholder activism." Several of the biggest shareholders of Goldman Sachs -- which, it should be noted, has morphed into the most profitable securities firm in history -- are pushing the bank to shrink its bonus pool, according to the Wall Street Journal.

This year, Goldman Sachs has set aside $16.7 billion for employee compensation through the first nine months of the year. According the WSJ's report, Goldman's shareholders want more of that money returned to the bank's investors.

Over the last year, Goldman Sachs' earnings from investment banking and wealth management have waned, while trading revenue has exploded. As we noted: "Out of 194 trading days through the end of September, Goldman Sachs earned at least $100 million from its trading division on 116 of them. The firm lost money from its trading activities on just one day during the three-month period ending in September, federal regulatory filings show. It made at least $50 million on four out of every five trading days."

The bank's stock is currently off roughly 27 percent since it peaked at $235 in October 2007. Yet, relative to other huge financial firms, Goldman's shareholders may have much to be happy about. As we noted, Goldman Sachs is the best-performing financial stock in the S&P 500 since Obama's election.

But, if you think the bonus-shrinking push by Goldman shareholders is altruistic, think again. Here's the WSJ:

"We think the compensation debate is coming across as a populist issue, when to us it is really about how Goldman and other firms can best allocate capital and how pending changes in the regulatory framework may change all this," Tom Marsico, founder of Marsico Capital Management, a Goldman shareholder told The Journal.

Goldman's largest shareholders, including financial titans like AllianceBernstein and State Street Corp., may also be irked, the WSJ notes, about the firm's stock performance relative to its pre-crisis peaks.

"One frustration: Despite record net income and compensation at Goldman as markets rebound and the firm outmuscles weakened rivals for business, analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial.

The decline is caused by issuing more than 100 million shares in the past year to bolster Goldman's financial position and capital."

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Yesterday, the widely-followed Wall Street analyst Meredith Whitney told Bloomberg News that, due to concern over government intrusion into compensation, Goldman Sachs has already lost tremendous talent to the hedge fund industry.

At the Atlantic, Daniel Indiviglio sees some significant upside to a reduction in Goldman's bonuses:

"First, it would boost their share value, making their equity more attractive. And don't forget: Goldman pays a fair chunk of its bonuses in shares, so that would actually benefit its employees too. Second, obviously its shareholders would be happier, which is an end most corporations strive for. Finally, it might help to calm the angry mobs."

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Comments

[tuberider]

Good thinking! I always drive the Lexus when I go visit the little people and leave the Rolls for the mistress to go shopping. It's all about respect.

[Washington Kos]

It is time for middle class bailout. NO more stupid rebate gimmicks. No more more neoconservative politics. We need more jobs even if these jobs create an economic net loss.

rec. reading: http://financeopinionss.blogspot.com

I'm tired of this over emphasis on efficiency; the last thing that gonna be on policy maker's mind is efficacy when 60+ million unemployment American says they aren;t gonna take it any more.

[wassilij]

IF These Goldman Sachs people keep flashing all these bonuses around like they have been lately----its only a matter of time before the people who have nothing left to lose---- WILL be coming after them!! They've lost HOMES,JOBS and INVESTMENTS and mark my word ---HISTORY WILL REPEAT ITSELF.

[Stop Wall Street]

it's too bad the only things recovering in this economy are the big banks & rich people, and the stock market
hat tip to http://financeopinionss.blogspot.com

what a joke

[duxguts]

Why do shareholders 'ask', why not 'tell', after all it's their money?

[schatsie]

We need to thank Warren Buffett for this beau geste, this wad of hot air....Is there anything about cutting the Board Compensation, is there anything about paying Real Taxes or just more deferral of taxes while the working class is sucked dry....

[SionShankel]

Split them up and never ever again let any institution become to big to fail and thus threaten the the financial and national security of this country again by being to big to fail..and regulate these robbers of America!

It drives me mad that we are so nervous and angry and spend so much on a few terrorists who kill so few people and yet when a bank, natural disaster, lack of medical insurance destroys whole communities and states in country and kills tens of thousands each year... we do nothing.

Quit fearing boogie men and fear the bottom line people!

[fuelie]

It is about time that shareholders revolt against ALL corporations to demand their fair share of the profits instead of squandering them on greedy employees and CEOs.

This notion of losing talent because they don't pay big enough bonuses is a bunch of hogwash. These people are grossly overpaid for what they do and don't work any harder than the majority of Americans.

[Subterfuge]

Wouldn't it be great if all the shareholders of Goldman Sachs sold their shares and reinvested them elsewhere?

[RTIII]

By definition that can't happen - there has to be someone to _buy_ the shares and that someone would then be a shareholder - can't get to zero.
.

[speakingtruth2power]

So small and medium sized banks are in danger now? This is no surprise.

Low tide is when the big guys buy up the little guys at great bargain prices.

This cycle is repeated over & over as the elite acquire the property others have struggled to earn.

Many have learned that these cycles are more than coincidental & suspect that the Fed helps the

elite keep grabbing larger shares of the pie. They keep US divided so we won't unite against them

with catch phrases and their MSM makes sure that there is a balance of power between the sides.

They demean those who talk of conspiracies and both sides call out woo woo, tin foil hat, etc., etc.

[GodBlessAmerica]

Count me as part of the "angry mob" (last line)

[BannedNBoston]

Split these institutions up!!
Into slivers!!

[knowhelpnow]

Well it's about time the share holders speak out about these bonuses and maybe they can vote on how much pay these people should make too.
GS was TBTF and now it's even bigger so just why did we go into debt saving their arses we should of let them all fail what kind of Capitalism do we have in this country anyway; when we bail out the hordes with trillions of $ and all the new tax breaks and let the rest of the country fail, no jobs, no health care, no house.
Break these Corporations up they are to big their CEOs make to much money and they don't know WTF they are doing.
Bankruptcy would have brought them back to the real world.

[ADONAI]

Hmmmm.......

Me thinks this thread has been abandoned

Time to move on to greener pastures?

My gut says..... maybe.

[leduck]

No one cares about sachs anymore...,
we've all moved on to Zombies and the places they dwell

[Dosadi]

Do they dwell any where close to PEAK OIL?

[ADONAI]

"Goldman Sachs Shareholders Ask Bank To Cut Down HUGE Bonuses"

So from HUGE to just "Obscenely Large" then?

I mean if it's HUGE already then why bother.

"Oh hey, why not take $3 million instead of $4million so these poor people feel a little better inside?"

Drag them from their buildings and bu'rn them to the ground.