Investment bank's pay and bonuses for the year equal to the size of Albania's GDP
Goldman Sachs, the City of London and Wall Street totem, will divvy up a $12.2bn (£7.9bn) pay and bonus pool among its staff, despite public and political anger and in the face of crumbling revenues and profits.
Even though the investment bank said it had cut its remuneration bill – salaries, bonuses and benefits – by more than a fifth, it still came out to about the size of the GDP of Albania and prompted an outcry from unions.
The figures were revealed alongside Goldman's latest annual results, which showed how post-credit crisis regulations and volatility in the eurozone are hurting bank profits. Revenues fell 26 per cent in 2011, the bank said, and profits slumped by 47 per cent to $4.4bn.
Some 42.4 per cent of revenues will go to employees, in the form of salaries, bonuses and benefits, the company said, up from 40.5 per cent last year, though a bank spokeswoman said that an increase in basic pay and benefits was the main reason for the increase.
Year-end bonuses, handed out in the coming weeks, will be down more sharply than revenues, she said.
Goldman also said it diverted $78m from its remuneration pool to fund Goldman Sachs Gives, its charitable organisation.
The bank has shed staff in some of its worst-hit operations and said it expected to save $1.4bn in annual costs once the cuts were fully implemented. It ended the year with 33,300 employees, 2,400 fewer than in 2010. It employs over 5,000 people in London.
The average remuneration for Goldman employees worked out to $367,057 – perhaps the most hotly anticipated single number to come out of the finance industry since the "Occupy" movements turned up the heat on banks. The figure this time last year was $430,700.
TUC general secretary, Brendan Barber, accused Goldman of "brazenly defying their own sliding profits by dishing out pay and top bonuses worth almost £240,000 a head". He said: "This latest example of excessive rewards for mediocrity should give the Government the green light to get tough on top pay. Ministers should start by putting workers on remuneration committees and making pay and bonuses above £260,000 liable for corporation tax."
Goldman is understood to be concentrating the bonus reductions among higher-level employees. The average partner faces cuts of one-half or more, though they could still be taking home between $3m and $6.5m.
Across the investment banking industry, bonuses are expected to be up to 40 per cent lower overall this season, compared to a year ago. As well as the ongoing nervousness caused by eurozone turmoil, which has hit bond trading and curtailed the big corporate deals that Goldman advises on, there has been a wider drop in speculative activity that reflects the lessons learned from the credit crisis.
Lloyd Blankfein, Goldman chief executive, held out the hope of an upturn in the near future. "This past year was dominated by global macro-economic concerns which significantly affected our clients' risk tolerance and willingness to transact," he said. "As economies and markets improve – and we see encouraging signs of this – Goldman Sachs is very well positioned."
Stock market investors hailed the bank's ability to push bonuses lower – not something that seemed possible on Wall Street in the boom years, when employees routinely threatened to walk out if they didn't get their expected payout. Goldman's profit downturn was also less bad than some forecasters had predicted, so its shares jumped more than 6 per cent in early trading.
Comment: When we reward failure it's time to pack up.
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