Goldman Sachs isn't likely to garner much public favor when it announces its earnings this week, as forecasts predict that the bank will boost the share of its revenues that it's putting toward employee compensation.
Although most analysts expect Goldman's earnings to have fallen in 2011, and although the company this year recorded only its second quarterly loss as a public company, employee compensation is on track to reach about 44 percent of the company's total revenues for the year -- notably higher than last year, when Goldman employee compensation came to just 39.3 percent of revenue, according to The Independent.
In other words -- if the forecasts prove correct -- even though Goldman's performance was worse than it was last year, the company's employees will be still be handsomely rewarded by raking in a larger share of the bank's profits.
Goldman's earnings report, which comes out this Wednesday, will be one in a series of closely watched releases from major financial firms this month. Taken together, the earnings reports from companies like Goldman, Citigroup, Wells Fargo, JPMorgan and Bank of America will offer a picture of how Wall Street has coped with the tumult of the past year, when markets tumbled, popular resentment welled up and politicians began talking more pointedly about the need for stringent financial regulation.
Thus far, the reported earnings of big banks have largely matched or exceeded the gloomy predictions offered by analysts. Citigroup announced Tuesday that its profits fell by 11 percent last quarter, more than what experts forecast. JPMorgan Chase has seen its profits drop by 23 percent. Wells Fargo's income is up 20 percent, but its revenue fell 4 percent.
Amid an atmosphere of sluggish activity, economic anxiety and public scorn for six- and seven-figure paychecks, companies are taking various measures to limit compensation costs this year, though their approaches seem unlikely to pacify the banks' more vocal critics.
Goldman, for example, may be increasing its pay-as-percentage-of-revenue despite actual revenues falling, but it is also halving the salaries of many of its partners, and denying bonuses to some employees, according to The Wall Street Journal. Morgan Stanley is reportedly limiting its bonuses to $125,000, deferring many bonus payments by one or two years, and cutting compensation for some employees by as much as 40 percent, according to the WSJ. And many firms are said to be considering pay freezes for their junior workers, according to Bloomberg.
Still, in absolute terms, banker salaries remain higher than the members of Occupy Wall Street would probably be pleased with. The average salary for a Goldman Sachs employee at the moment is $292,397 -- down from last year's average of $370,056, but still about 11 times the current U.S. median salary of $26,364, a pay scale that leaves many families struggling to cover basic living expenses.