Jan 17 (Reuters) – This is how capitalism is supposed to
Goldman Sachs has cut back sharply on employees’
piece of the revenue pie, taking it to 21 percent for the fourth
For long-suffering shareholders, this is the best news out
of Wall Street in, well, maybe forever.
Goldman paid out 37.9 percent of revenues in compensation in
2012, down from 42.4 percent from a year ago. It is the lowest
payout ratio since the firm went public in 1999. The bank did it
by shedding people. Average compensation actually rose 9 percent
to just under $400,000, helped by a 19 percent increase in
As such, it is not clear that Goldman has bought into the
notion that the wunderkinds of Wall Street are overpaid, rather
instead into what must be a more comfortable conclusion: that
the ship was carrying too many passengers.
Yet, with continued pressure from shareholders – a given -
Goldman may well find that, even in a recovery, it must allot a
declining share of incremental revenue to employees. In other
words, when investment banking booms again, it may be forced to
staff up but still keep a lid on overall compensation.