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Goldman's Powerpoint Defending Multi-Million Dollar Bonuses
When Goldman releases a public powerpoint defending its compensation practices and its soon to be disclosed multi-million dollar bonuses, you know that the firm is expecting a firestorm once the proxy is released and leaks about what top traders receive come out.
Here is how Goldman defends it bonus, now apparently known as discretionary compensation:
Attract and Retain Talent
- Our compensation framework is designed to attract and retain the most talented human capital, which has been a key contributor to generating excess returns relative to peers
Align Compensation with Results, Particularly for Senior Management
- To avoid misaligning compensation and performance, we do not award multi-year, guaranteed employment contracts
- Senior and more highly paid employees experience more variability in their compensation based on year-to-year changes in our firm's results
Evaluate Performance Over Time
- Compensation, in most cases, includes discretionary compensation, as appropriate, awarded at year-end
- The percentage of compensation awarded in equity increases as an employee’s total compensation increases
- Equity awards are subject to vesting, transfer and other restrictions over a extended period of time, including recapture provisions
Discourage Excessive or Concentrated Risk Taking [oh THIS IS RICH]
- The risk/return profile of one’s business is taken into account in individual compensation determination
- Revenue producers do not determine the compensation of risk managers
- No employees compensated based on a fixed percentage of earnings
Align Employee and Shareholder Interests
- Our compensation policies encourage employees to think and act like
long-term shareholders. Being significantly invested in our stock over
time, as part of an individual’s compensation, advances our partnership
culture of stewardship for our firm
Somehow omitted from all of this is the key premise: raping the middle class repeatedly, over and over, without the benefit of any dollar collapsing lubrication
Some of the amusing charts that will have no power whatsoever to prevent Congress from clawing back bonuses when the house of card equity market finally collapses are presented below.
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Tyler, I assume you heard about GS upgrading the entire REIT sector today? That was a good bet you had.
This is a classic "baffle them with bullshit" report/response. We will all look back on this period and the one word that will dominate is "arrogance." Unbelievable...
The video of that statement is being broadcast from Congress currently.
What is really arrogant is that Goniff Sachs is paying $21 Billion in bonuses to employees while only paying $700 million in dividends to shareholders.
Why do they even bother being a public company? The shareholders are treated like buffalo chips.
Didn't you read the above comment? It's working out GREAT for Goldman Sachs.
As to why people own shares of GS?
Some people, I guess, see it as a store of value more reliable than gold - thanks to their political connections.
GoniffSachs payroll is 100 times the payroll of the NY Yankees (a legal monopoly). It seems that GS has done nothing for the benefit of its shareholders with regard to its compensation scheme.
During the late 90's GS was extremely profitable, but losing clout to banks like JPMorgan, Citi, even Morgan Stanley, because it lacked the desperately needed capital to continue to grow through aquisitions, as GS remained privately held partnership. By becoming a public company in '99, it became infinitely easier to make acquisitions, grow their operations, and become what they are today. [GS earned $2.31B in FY2001 v. $8.44B during first 9 mos. of FY2009] "Goldman Sachs: The Culture of Success" is a good book to give you background about the late 90's era:
http://www.amazon.com/Goldman-Sachs-Culture-Lisa-Endlich/dp/0684869683
As to why own this stock? Well, not for the 1.40% yield; but it is best of breed; its up 97% YTD; up 181% from January lows; and since the supermajority of the bonus pool is paid out in stock, Goldman is always buying itself. Meredith Whitney knows this one pretty well and called the top, so I wouldn't get back in now.
"best of breed" well that depends on what the breed is. as for your analysis of GS common stock return to shareholders, you forgot to mention a few things. GS went public in 1999 at about $75 and was basically up and down dead money until 2006. Then it went parabolic to $250. From August 2006 until February 2008 it traded above 175. Anyone who invested in GS during that time period is under water. Do you know how much risk they were taking on behalf of the shareholders ??? I don't think the stock's price action since 1999 reflects what I would characterize as a solid transparent growth company. If you like being an investor in a company whose stock goes from $250 down to $50, then up to $175, well that's your choice.
I wanted to focus on why Goldman decided to go public, as well as look at the current price action, but here's the extended return figures:
Since Goldman’s IPO in 1999, they have outperformed the S&P from mid-2000 onwards. By the start of 2006, the S&P was still down over that period, while GS was up roughly 75%. As of now, GS is up almost 120% while S&P is down marginally. Volatile? Absolutely. Long term buy? No way! Do I buy it here? Like I said in my post before, I wouldn’t touch it. Has it done well for those who held it from it's IPO date? I would say so.
The bottom line is GS outperforms in bull markets, underperforms in bear markets. Buy/sell based on the valuation relative to the market.
Goldman went public when they decided to focus their business model on trading. They were previously a partnership, where the partners put up most of the firm's capital and were personally liable for the firm's debts. They sure didn't want to gamble on those terms! But with other people's money and friends in government to bail them out when needed, rock and roll!!
They still run the place as a partnership when they it comes to the winnings - look at comp vs profits. Perhaps they make enough profit most years that they can pay themselves billions and still have profits left over for shareholders. But that's only because Wall Street, as an anti-competitive cartel, makes obscene profits far beyond any other industry in America. See "Greed Merchants" by Philip Augar.
Absolutely. The only time you want to play along is when you expect their fortunes to take a drastic turn for the better- like the beginning of this year.
This is how Tiger should have handled his transgressions.
That's a nice R2 on Page 8!!!
"Let them eat cake."
The rest of us are just jealous of their compensation structure. After all, our fixed $2M annual salaries don't properly incentivize us and can lead us into excessive risk taking.
the best capitalism that taxpayer bailouts can buy !
At the same time:
Isn't there a contradiction?
Are you serious with that question or just an idiot?
Is that a question or just an ad hominem? I'll be generous and give you a third option, working for GS? If it's the third don't bother answering and enjoy your bonus.
I see, you've answered my question.
As long as it was one, I have.
Nothing like a power point to provide quantitative analysis on how GS raped the US taxpayer. In this instance, a stick figure drawing would have sufficed.
Folks -- if you are not a GS shareholder, your opinion on who gets paid how much at GS does not matter - you are not party to the transaction. If you don't like GS's connection to government activities or support from the government, your avenue for disgust is via the government (who you voted for). GS has no duty to provide for the care and feeding of those who are not its employees, shareholders or creditors.
I agree the government should not be supporting GS, but that is 100% the fault of the government, not GS. GS would be stupid not to take advantage of moronic lawmakers and policy makers who have no earthly idea what they are doing.
Once upon a time, in the dim mists of time, there was a thing. It was called morality. And this thing had an angry little sibling. It was called law. Together, morality and law helped to provide a cohesive structure for society. People were expected to follow morality. When they didn't, the angry sibling stepped in and roughed them up, with varying effects. Sometimes they didn't survive their encounter with the little sibling. Everyone realized that the little sibling was frequently abusive, and wouldn't be needed so much if morality were observed.
So, here, you're saying to toss morality out the window, and anyway to manipulate the law, even in ways that are probably illegal and most definitely immoral, is OK. Basically, anyone who can avoid getting prosecuted should not be criticized.
Do I have that right? We're flying down the tubes to the apocalypse if I do.
We as a country need to take a hard look at the phrase "it's just business". Sadly we as a society have accepted the fate that if it's immoral we should make sure it's put into a corporate structure so no one is responsible.
It is not immoral or unlawful for companies to over pay their employees - stupid or unwise maybe - but not immoral. If anyone should be upset, it should only be shareholders.
Look, we operate in a nation of laws and supposively have the liberty (a forgotten concept in the land of unending growth in government control) to do things that are legal. What you think is immoral might be ok by others. Some may think 50% of the people paying no income taxes is immoral or abortion is immoral, but guess what? -- that's the law and if you disagree take your grievance to the government, not to those who are operating within the law.
If you do not like the ways government supports GS operations, call the government on the carpet, not GS.
"It is not immoral or unlawful for companies to over pay their employees - stupid or unwise maybe - but not immoral. If anyone should be upset, it should only be shareholders"
And the taxpayers can suck up since those record bonuses were in part thanks to their bailout money. If not for these money, GS wouldn't exist, so yes it is immoral no matter how you put it.
"If you do not like the ways government supports GS operations, call the government on the carpet, not GS."
Do you really can draw a perfect line dividing two of those and why not question both of them?
1. We can debate where the bonus dollars came from, but if they came from the government, attack the problem at its source - the government.
2. Unless you are a GS shareholder, you have no position to do anything about their operations. As a US citizen you have the ability to attack the government for giving GS money - pursue the attack on the institution with which you have nexus - the government. No government money to GS, then no problem.
Immoral company leading you, the obviously you as being immoral for supporting such activities. This is PRECISELY what is wrong with American capitalism today.
can't make this up:
Goldman bonuses: $21bil
Goldman borrowed (and still outstanding) thru TLGP: $21bil
In the chart showing indexed growth in EPS, Comp, Revenues and BVPS, I keep wondering why they didn't show the CAGR in aggregate payments received from the Fed, Treasury, AIG and taxpayers?
I hate to say this but Obama is making it extremely easy for Sarah Palin in 2012. Main Street (GM) gets the rough treatment and the bankers make billions. All Sarah has to do is to link the bailout with the bonuses and Obama is toast. Goldman et al deserve to get all the US tax payers' future earnings because when the ship is going down, congress cares more about their own parachute than the common Joe.
I actually spoke to a banker about the bonus issue and he said that since bankers are smarter than the avg employee, they need the bonuses.
Obama 2008
Palin 2012 (Mayan apocalypse optional but increasingly likely)
Daley/Sharpton 2016 (see the pendulum getting out of control)
Joe the Plumber/Putin 2020
Marxey Mouse 2024... and it ends
No one "needs" the bonuses. Nice money if you can get them, but I haven't heard of any GS employees going hungry in quite a while. It's probably just a matter of time before ACORN et al start roughing up GS people. (Ironic given that both helped Obama into office!)
Translation: We make a s***load of money thanks to our govt connections. If investors want to continue to profit off the fact that we call the shots in Washington, they will shut the hell up and do what they're told.