January 14th, 2010

Part III - Adventure Sports: Diving Deep Into Compensation.

The focus this week has been on the big banks.


Wednesday was ‘bank bashing’ day over at the Financial Crisis Inquiry Commission. Unusually pertinent and pointed questions and as usual ambiguous, ‘beating around the bush’ answers characterized the session.


On another note, a WSJ article indicated a possible ‘one upmanship’ between Goldman and Morgan Stanley. Both banks tried to outdo each other and announce their earnings before the other. Apparently, there is some belief that the bank with the earliest earnings announcement ‘catches the worm’, interms of a stock price rally. Talk about being hyper competitive….


Anyway, so here at InvesGuard we have also been doing our little bit of bank scrutiny in terms of their compensation data. Over the past two posts, we looked at JP Morgan as well as Bank of America and today we will be reviewing the profile of Goldman Sachs.


Instead of writing reams and reams on Goldman’s compensation practices, I thought it would be better if I just present this data and leave the analysis to you. The data sort of speaks for itself.


Compensation for 9 months ended 2009: $ 16712 million


Compensation for 9 months ended 2008: $ 11424 million


Increase in 2009 over 2008? : Of course (its Goldman we’re talking about, remember?)


Percentage Increase in Compensation : 46%


Number of employees for 9 months ended 2009: 31700


Average Per employee compensation (2009): $ 527,000


Average Per employee compensation (2008): $ 303,800


Ration of Compensation and benefits to Net Revenues (9months 2009): 47%


Revenue Change (9 months Year over Year comparison)


Investment Banking Revenues: Significantly lower


Trading and Principal Investments: Significantly higher by 108%


Asset Management and Securities Services: Lower


So what do analysts say about Goldman?


Out of 26 analysts surveyed, only 9 (less than half) had a strong buy recommendation, 7 had a ‘hold’ and 10 analysts recommended a ‘buy’. (Source: First Call / Thomson Financial)


InvesGuard Score:


Over extended directors, board independence issues coupled with poor Social and Environmental disclosures give Goldman an average rating. Look it up here.


Come January 21, (Goldman’s Quarter 4 earnings release), it should be interesting to see whether all the donations, charitable giving and some press coverage is enough to counteract the negative public perception of its earnings.


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