By David Ellis
Goldman Sachs delivered some of its best results in the firm’s history on Thursday, after it drastically reined in pay for thousands of employees.
Hoping to defuse a potential backlash over year-end bonuses, the Wall Street powerhouse said it trimmed its compensation pool to $16.2 billion during the quarter.
That helped boost its fourth-quarter results to $4.9 billion, or $8.20 a share, eclipsing analysts’ estimates for a profit of $5.20 a share, according to Thomson Reuters. Profits for 2009 also soared, hitting a new record of $13.4 billion.
Robust activity in Goldman’s massive trading division earlier in the year helped juice the firm’s full-year results, even as trading dramatically slowed down in the final months of the year.
And while revenue within Goldman’s traditional investment banking and asset management businesses fell from a year ago, that decline was easily offset by the reduction in employee expenses.
Money spent on salaries, benefits and bonuses in 2009 ended at 38.5% of the firm’s total revenue, the lowest level for that ratio since the firm went public in 1999.
David Viniar, Goldman Sachs’ chief financial officer, indicated that the move was done largely in response to the recent outcry about compensation from the American public, who helped prop up the firm with taxpayer dollars a little more than a year ago.
There has certainly been much frustration on Capitol Hill as well, with politicians incredulous that financial firms like Goldman Sachs would dare pay outsized bonuses, particularly at a time when millions remain out of work.
“We are not deaf to the calls for restraint and we heard them,” Viniar said during a conference call with the media.
Hoping to defuse a potential backlash, the company has taken aggressive action on several fronts in recent months. In December it revoked cash bonuses for its 30-member management committee, as well as contributing $620 million to two charitable organizations the firm oversees.
November 25, 2009
By Ben Rooney
After balking at government imposed pay restrictions, American International Group’s chief executive Robert Benmosche has officially agreed to a non-compete contract that could total $10.5 million, the company announced Tuesday.
Benmosche, who was named CEO in August, had expressed frustration with the constraints placed on AIG by the government after the global insurance company was bailed out last year.
He reportedly threatened to quit his post in board meetings earlier this month, before issuing a statement saying he is “totally committed” to staying on as CEO.
AIG spokesman Mark Herr said Benmosche agreed to a “non-compete” contract and that he is “committed to staying” at AIG.
Benmosche is one of several high-level executives at seven private companies under the purview of the Obama administration’s “pay czar” Kenneth Feinberg.
In October, Feinberg unveiled a series of drastic pay cuts for 136 top executives at seven of the nation’s biggest bailed-out companies, including AIG (AIG, Fortune 500), Citigroup (C, Fortune 500), and Bank of America (BAC, Fortune 500).
AIG received a $182 billion lifeline from the government last year as the credit crisis forced the company to the brink of collapse. In exchange, the government took an 80% ownership stake in the company.
Despite ongoing criticism of the company’s compensation practices, Benmosche successfully negotiated the largest award of any CEO under the government’s new curbs on executive pay.
In a press release, AIG said it will implement Benmosche’s previously announced compensation agreement, which includes a $3 million base salary and $4 million in AIG common stock.
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