Marc Michel's  Instablog

What group of hedge fund investors pay their managers 50% of profits?  Goldman stockholders, that's who.  Over 50% of the profits generated at Goldman come from the employees use of the stockholder's equity capital.  The other 50% comes from leveraging the Goldman brand name to provide services like M&A advisory, IPOs, Prime brokerage, etc.   And yet, the  employees  have convinced the stockholders that they are darned luck to have them. 

What chumps the stockholders are.  If these people were risking firm capital and it didn't enjoy the Goldman moniker, it would be called a hedge fund, and they would be paid 20% of profits plus  2% of equity assets under management.  At Goldman, its 50%.  On the other  services side of the firm, I assure you that the people running these businesses would be no where near as successful if they didn't have Goldman Sachs on their business cards.  Yet, the stockholders still pay them 50% of the profits. 

Goldmans return on equity has plummeted in the past year and was only as high as it was in the past due to excessive leverage and risk taking.  For the employees, it is the classic heads I win, tails you (the stockholder) lose.  Who wouldn't want to work there with such chumps for owners.