Goldman Sachs Cuts Compensation Pool to $15.4 Billion

Goldman Sachs Group Inc.’s compensation and benefits expense fell 5 percent to $15.4 billion in 2010 as the firm’s revenue decreased 13 percent and the number of employees climbed.

The amount, equal to 39 percent of revenue, is enough to pay each of the firm’s 35,700 employees $430,700, according to a statement today from the New York-based bank. That’s down 14 percent from an average of $498,246 for the firm’s 32,500 workers a year earlier.

After setting an all-time high for Wall Street pay in 2007, Goldman Sachs cut compensation costs to 36 percent of revenue in 2009, the lowest ratio ever, as it reported record earnings and U.S. banks faced pressure from regulators and lawmakers to rein in bonuses. JPMorgan Chase & Co.’s investment bank cut average pay for employees 2.4 percent to $369,651 last year, the New York-based lender said last week.

“There are a lot of eyes on what they’re going to do from a compensation perspective,” said Jason Tyler, senior vice president of portfolio management at Chicago-based Ariel Investments LLC, on Bloomberg Television’s “In The Loop” with Betty Liu. “So the numbers are lighter than what they could have been.”

Charitable Giving

Investment banks set aside a portion of revenue throughout the year to pay employees and typically decide bonuses at the end of the year based on full-year results. Average compensation figures, derived by dividing the compensation pool by the number of employees, don’t represent any individual’s worker’s actual pay. Bonuses vary widely depending on an employee’s seniority, job title, and performance.

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, 56, is the fifth-biggest U.S. bank by assets, and JPMorgan is the second largest. Goldman Sachs’s compensation figures don’t include costs tied to the U.K. bonus tax, for which the firm recorded a $465 million expense in 2010. In October, it said the cost would be $600 million.

Compensation was reduced to fund a $320 million charitable contribution to Goldman Sachs Gives, the bank said. The firm had a negative compensation expense of $519 million in the fourth quarter of 2009 as it cut pay to fund a $500 million contribution to the charity.

The following table compares compensation at Goldman Sachs and JPMorgan’s investment bank.


Year through Dec. 2010

Goldman Sachs JPM Investment Bank

Revenue $39.2 billion $26.2 billion

Compensation $15.4 billion $9.73 billion

Comp/Revenue Ratio 39 percent 37 percent

Employees 35,700 26,314

Average Comp/Employee $430,700 $369,651

Year through Dec. 2009

Goldman Sachs JPM Investment Bank

Revenue $45.2 billion $28.1 billion

Compensation $16.2 billion $9.33 billion

Comp/Revenue Ratio 36 percent 33 percent

Employees 32,500 24,654

Average Comp/Employee $498,246 $378,600