Goldman's Compensation Costs Are Still Too High

Goldman Sachs (GS) reported Q4 results yesterday and of course lost money. If they had shown black ink, no one would have believed it.

Take a look at compensation costs as a percentage of revenues. In this business you have to pay your people for results. The question becomes are they deleveraging their people costs as fast as there financial costs.

In 2007 they paid out 44% in compensation and benefits. In 2008 taking out severance costs of approximately $275 million in Q4, the ratio of compensation and benefits to net revenues was 48.0% for 2008. 4% at these levels is critical. Sounds like Goldman has some ways to go.

Comments

[Phantom Gre...:]

You're looking at "compensation" from the wrong perspective. The entire purpose of GS is to enrich its employees. If a few leftover crumbs happen to be available to the stockholders, then great. But that's not why the company exists.

That's why, whether or not GS is a good company, I don't think its a good stock. I don't think there's any other industry where management and employees rape over the stockholders quite so brazenly.

Everyone should keep this in mind before they buy GS stock.

2008 Dec 17 07:19 PM

[herbert hoover:]

Shouldn't Paulson have insisted that GS employees get paid no more than their Japanese counterparts as a condition of TARP funding? Oh, what was I thinking, GS is a "friend of Hank". Never mind.

2008 Dec 17 08:12 PM

[Farina Oweena:]

I don't believe this company still exists. They were able to get money and not tells us where it went. How did Paulson get away with this? This is just another case where we the American people are getting screwed in the ASS with no Vaseline. I think all the suckers who voted for this 700 trillion or however much it was should be burned at the stake like the witches in Salem.

2008 Dec 17 09:11 PM