Goldman Sachs (GS) May Buckle To Pay Package Pressure

The argument that Goldman Sachs (NYSE:GS) will pay its employees too much this year has always been a weak one. Some shareholders believe that more money should be going to them, perhaps in the form of a special dividend. Some members of Congress and the Administration simply object to high pay packages at any large American bank. They believe that the TARP bailed these institutions out and the firms should acknowledge that by keeping compensation modest during a period when the taxpayers who funded TARP are losing jobs.

Goldman probably did not need TARP funds. Hank Paulson forced all major financial firms to take some money so that it did not seem that some were much weaker than others which might have triggered a panic. Goldman has paid back its TARP money and the government made a handsome return.

Goldman’s shareholders have also done extremely well. The company’s shares are up more than 100% this year.The fact that they want more is a by-product of the normal greed that goes with wanting a bigger piece of the growing Goldman earnings pool.

Goldman may buckle to some of the pressure from shareholders and the government. The FT is reporting that Lloyd Blankfein, the firm’s CEO, is considering a plan under which “senior executives including Mr Blankfein could be awarded all their annual bonus in company stock.” The plan may actually benefit Goldman management if the stock goes up more and the people paid with equity are not forced to hold it for years.

The issue is still whether the Goldman management and traders deserve huge payouts. By any reasonable measurement of performance whether that be share price or earnings, they do.

Douglas A. McIntyre