Maybe Goldman Sachs (NYSE:GS) CEO Lloyd Blankfein needs to check in with his CFO once in a while to see what’s happening at the compensation level of the company, as he’s going to have some explaining to do after taking the politically correct position of outrage at the huge compensation those working at Wall Street earn, and yet word is that Goldman’s bonus pool is hovering near record levels for the year, which will come back to haunt Blankfein, if those rumors are true.
Just last week in Germany, Blankfein said the anger over the compensation of Wall Street workers’ pay was “understandable and appropriate.” That seems to say that Blankfein is either out of touch with his accounting department or feels he has the upper hand in reference to compensation, and so says what people want to hear without concern over the potential fallout from it for himself or Goldman.
There are a couple of different views on this if it is in fact the reality of the situation, which preliminary expectations for profits being very high, probably makes it true.
Those believing this think it would be a big mistake to spark this type of fire, and that Wall Street needs to be very careful in this area.
The other view is if the industry doesn’t pay their people for their strong performances, they will walk out to more lucrative opportunities like hedge funds and others to get the type of bonuses and pay they want.
Within those parameters it is thought by some in the case of Goldman Sachs, that they’ve paid back the government the bailout money they received, and so are free to distribute the profits in any way they want to.
Some feel it’s impossible not to pay these large bonuses because expectations for them with the strong profits are already in place, and it could cause some serious problems with top performers if that were to happen.
Taking this altogether, to make it more palatable to outsiders, the company could offer part of the bonus with stock options, stock or some other type of compensation that is deferred, cutting back on the amount of cash which is the catalyst that generates the negative outlook of many people concerning bonuses.
What I find interesting in all of this concerning the statements of Lloyd Blankfein, is because Goldman has paid back what they got from the government, and a number of their large competitors haven’t, he may be throwing out these comments to draw attention to the compensation of his competitors’ employees, putting downward pressure on their bonuses to give his people and company an upper hand.
The reason I think this is if Blankfein really was that out of touch with the profits and compensation to be handed out by Goldman to their people, he wouldn’t be around long. So I have to conclude that he’s playing a little game in order to put the attention on bonuses again, where he will then use the argument concerning Goldman Sachs that they’ve paid back their bailout and are now free to pay their people what they want.
It’s difficult to see how the government could intervene there, when the attention will somehow in the middle of all this be subtly directed to the large banks who haven’t paid back the bailout funds yet. Pretty smart if this is what Blankfein is doing, and I think it is.
