Goldman’s monster financial-crisis pay award

By Felix Salmon
January 19, 2011
Dealbook and Footnoted -- the very epitome of professional financial blogs -- have collaborated in a big investigation of Goldman Sachs's regulatory filings and partnership documents. The investigation seems to have turned up some pretty juicy stuff, but I'm not a fan of how the results were presented.

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Dealbook and Footnoted — the very epitome of professional financial blogs — have collaborated in a big investigation of Goldman Sachs’s regulatory filings and partnership documents. The investigation seems to have turned up some pretty juicy stuff, but I’m not a fan of how the results were presented.

For one thing, the big NYT report coming out of the investigation contains zero substantive links to any of the documents they used. There are no links to SEC filings, no embeds of partnership documents, nothing. The post does say that the NYT and Footnoted “examined nearly 5,000 pages of regulatory filings,” but gives no help at all for anybody who would like a pointer to which filings exactly are the ones they’re writing about.

As a result, some great information gets missed, and is that much harder for the rest of us to find. For instance, the main news in the story is this:

Nearly 36 million stock options were granted to employees in December 2008 — 10 times the amount issued the previous year — when the stock was trading at $78.78. Since those uncertain days, Goldman’s business has roared back and its share price has more than doubled, closing on Tuesday at nearly $175.

The story goes on to detail the dates at which the options can be exercised. But there’s much more to be said on this matter. For one thing, the monster option grant took place during Goldman’s notorious orphan month, meaning that it would never appear in an annual report. And for another thing, it was very expensive even at the time.

The place to look, if you want a link to an SEC filing, is here, where Goldman discusses its Employee Incentive Plans.

The first thing you see is that between November 2008 and December 2008, Goldman granted 20,664,896 restricted stock units. And according to a footnote, the fair value of RSUs granted in the month of December 2008 was $67.60 apiece. Which means that in December 2008, Goldman gave out $1.4 billion in RSUs.

Then you get to the options. Goldman granted 35,988,192 options at a strike price of $78.78 between November and December 2008; the filing goes on to say (look at the top of page 200) that the fair value of those options was $14.08 apiece. Which means that on top of the RSUs, Goldman also gave out $500 million in options during its orphan month.

Those options are worth much more today, of course. I don’t have an option calculator handy, but they have to be worth at least $100 apiece, given that Goldman is trading $100 above the strike price. That means the the value today of the December 2008 options grant is somewhere over $3.6 billion.

And the RSUs have gone up in value too: 20.7 million RSUs all appreciating by $100 apiece means a gain of $2.1 billion.

Add it all up, and the various stock-related grants given in one month of 2008 (we’re not including annual bonuses here) were worth $1.9 billion at the time, and are worth somewhere in the neighborhood of $7.6 billion now.

Remember that December 2008, when Goldman made these grants, was the worst month in the company’s history: it lost $1.3 billion, and was mired in the depths of the financial crisis. Yet many partners will have received stock and options awards that month which are worth hefty eight-figure sums today. Not bad for a month’s work.

There’s much more in the Dealbook/Footnoted story, including the intriguing fact that 61% of Goldman partners are US citizens, excluding the ones with dual citizenship. I’d love to see where that information came from. Maybe at some point in the future, these two blogs will see fit to actually publish the information that they spent so much effort finding.


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Goldman’s last medium term note prospectus was 144 pages. Is 5,000 pages that much? Any associate in the litigation department of a NYC law firm would not be impressed.

Posted by gringcorp | Report as abusive

Many of the business blogs are running with this story today but I’m not sure I understand why?

It’s easy enough, Felix, to speak of how much these options are worth today; when they were granted it was far from obvious that GS stock would ever recover and, indeed, if GS would even continue to exist.

A payout of $7-8BB isn’t particularly shocking, either, in view of the 2011 bonus pool.

I’m not a fan of GS but I don’t think there’s anything scandalous here…

Posted by dbsmith1 | Report as abusive

dbsmith1, the scandal remains that the wages, bonuses and stock options were never curtailed but deferred and are being collected when those who helped ‘save’ them from feeling the recession or going under are still in the throes of a recession with more hardship and promises of austerity to come.

How can you see no scandal there, when the TBTF banks had their hand in the source of the recession. And to further jab at wounds, $15.4bn to pay its staff for 2010, amounting to a possible average of $435,000 per employee…. is a rather staggering amount to those who are losing their homes, on food stamps and unemployed.

And there are more deferrals which will also fall during the recession as the economy will not be in recovery for years.

I think there are a ton of people like me who see the scandal in it.

Posted by hsvkitty | Report as abusive

A comparison to show how scandalous it is (even if you can’t see felix’s point) te-dismantled-american-middle-class-aver age-banking-bonus-goldman-sachs-record-h omeless/

Making the connection … with a little irony …that this is trickle down economics in action Fw

trickle down …

Posted by hsvkitty | Report as abusive