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Goldman Sachs in tough spot over pay
The headquarters of Goldman Sachs Group, Inc. is seen at 85 Broad St. in New York City.
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Kai Ryssdal: Sometimes things don't work out exactly the way you planned. That's a lesson Goldman Sachs CEO Lloyd Blankfein is learning all over again. Last week, Blankfein was in Frankfurt, Germany, attacking Wall Street compensation. He called the public outrage over bankers' pay "understandable and appropriate."
And yet, rumor on Wall Street has it that Goldman's own bonus pool this year is going to be near record levels, which suggests there is more outrage to come. Marketplace's Amy Scott reports.
AMY SCOTT: It's hard being so good. Goldman Sachs is expected to report another quarter of bumper profits next month.
Analysts credit the stock market rally, a surge in deal-making, less competition, and oh yeah, a big boost from the federal government.
LEN BLUM: I think it is an awkward PR moment for Goldman.
That's Len Blum with Westwood Capital. Goldman paid back its $10 billion in bailout money. Blum says the company can pay its employees what it wants.
BLUM: Some people might not feel good about that. But they've made money, and they have the right to distribute their profits as they see fit.
But a populist backlash could reignite the ire of lawmakers. Rolfe Kopelan is with The Capstone Partnership, a Wall Street recruiting firm.
ROLFE KOPELAN: If they do pay out these huge bonuses now that's just going to infuriate more and more people. So you just ratchet up that heat and Wall Street better take care, because they can get crushed. With a lot of these new regulations that are being tossed around, they'll be just adding wood to the fire to do it.
Then again, if they don't pay huge bonuses, some say all those Masters of the Universe that have been making Goldman money could walk out the door.
Eric Moskowitz is head of compensation consulting at Options Group. He says as the market bounces back, bankers want their pay to bounce back too.
ERIC MOSKOWITZ: There's a lot of room for optimism, and thus bonus expectations have risen across Wall Street and across, of course, all the global capital markets.
Moskowitz says Goldman may try to strike a balance by paying less cash, more stock and deferred compensation. Goldman Sachs had no comment.
In New York, I'm Amy Scott for Marketplace.
Isn't the problem the very gristle and bone of American corporate structure and laws? Goldman has public shareholders. Your Aunt Minnie can put her school retirement payments into Goldman stock Goldman has significant legal duties to protect and grow that investment. Should "excess profits," whatever that means, go to charities? Shareholders should decide, no? Goldman is great at what it does. If the whopping profits do not go to its stellar employees (and graveyards are full of indispensable men and women, as DeGaulle said), it would go to shareholders. But corporate structure is scuplted in light of American corporate law,making it almost impossible for shareholders to control the behemoths they "own." Change must come at the most elemental and legal levels if it is to come at all.
Mr. Kessler's making the Wall Steet meritocracy sound a lot like the Mafia. People get "bumped" in that organization, too, if they fail to perform. Despite RICO laws, they will always be with us, too. If Goldman Sachs at least donated some money to some worthy causes, like nonprofits that have been devastated by the current economy, perhaps we wouldn't despise them as much.
