As time passes, it becomes clear that many people at Goldman Sachs have received huge bonuses over the past year. Those with the biggest payouts, however, are Goldman executives, who seem to be paying themselves something extra to keep themselves from leaving.
The new pay scales for top performers in investment banking at Goldman Sachs are around $500,000 for partners and $1 million for vice presidents. We reported on VP numbers last week; Financial News reported the associated figures last Friday. It is worth remembering that you can become a partner at Goldman Sachs with only two and a half years of experience, and a vice president with only two more years. Presumably, it’s not newly promoted associates and vice presidents who receive these amounts, but still – recipients are likely to be in their mid to late twenties.
While everyone is talking about the numbers at the bottom of the Goldman hierarchy, the real compensation drama is quietly playing out at the top. Last October, Goldman offered chief executive David Solomon and chief operating officer David Waldron an additional $50 million as part of an “enhanced retention” package in case they felt like leaving. This month, he offered Goldman Sachs partners already on $950,000 salaries and much higher bonuses a one-time top-up equity bonus to keep them from drifting into fintechs and to keep the gap between the remuneration of partners and remuneration of general managers. And now Goldman has offered its executive committee members new stock rewards that could be worth a lot in a few years if the company hits certain targets.
No one knows how much those extra amounts at the top of Goldman’s pyramid are worth, but it’s safe to say they’ll earn significantly more than the well-paid partners and vice presidents at the bottom. The real question is why Goldman’s top executives need extra incentives to stay at this level when last year’s proxy statement suggests they are comfortably earning over $10 million, plus they all have the prestige of sitting on the management committee.
Bloomberg suggests Goldman was spooked by the unexpected departure of top executives like Greg Lemkau, co-head of its investment banking division, last year. Coincidentally, Lemkau, who is now managing director of MSD Partners LLP — the $15 billion investment firm that began life as Michael Dell’s family office — spoke with the Financial Times about his exit. “I think that was the uniqueness of the opportunity at MSD,” Lemkau says of why he left GS. “I wasn’t looking to leave…in fact, when Michael first called me about MSD, I said, ‘I’m flattered and thank you, but no thank you, I like my current job. .”” Dell asked Lemkau to think about and get back to him. Lemakau thought and decided that this was indeed a rare opportunity to work with one of the “world’s great business builders” on a mature investment platform.
MSD generated 28% returns last year, and Lemkau has “skin in the game”, but he told the FT that his decision to leave Goldman was less for making money and more for “professional challenge, challenge intellectual” and build the business. In his case, it’s not clear that a top-up capital payment would have made much of a difference anyway, but if you’re a senior executive at Goldman, they’re probably nice to have.
Separately, António Horta-Osório’s exit from Credit Suisse is starting to appear to have a lot to do with crossing gray lines in the use of the company’s expense accounts. The Wall Street Journal reports that Horta-Osório had used the Credit Suisse private jet to travel to work meetings in London or Lisbon that coincided with his meeting with his family. On several occasions, a Credit Suisse plane would have dropped him off on Thursday, left empty for Zurich, then returned to pick him up and brought him back to work on Monday morning. The planes were rented and had to return to Zurich for the weekend and Horta-Osório was not breaking any Credit Suisse rules, but he seemed to do very good use of bank facilities. This eagerness to take advantage of what was on offer was also evident when Horta-Osório allegedly took members of his family to the Wimbledon tennis final and the UEFA football championship final on tickets purchased by Credit Suisse. for clients who could not attend due to COVID. Yes, he broke quarantine rules in the process, but an apparent desire to avail himself of bank freebies also appears to have been part of the problem.
During this time…
JPMorgan wants English staff to start returning to the office in greater numbers from February 1. (Financial News)
56, former Goldman bond trader Dan Morehead launched his first crypto fund in 2013 and now manages around $5.6 billion.“Crypto is so much more compelling than any other trade out there.” (Bloomberg)
Adrian Farnham, head of the London Metal Exchange, resigned for a crypto start-up Komainu, a digital asset custody firm backed by Nomura and hedge fund manager Alan Howard. (FinancialTimes)
Coinbase shares are down 23% this year. (Bloomberg)
Citi has started hiring for the top job in its digital assets unit. (The block)
Banks expect private equity firms to raise $100 billion in debt this year. (Bloomberg)
Dan Dowd, global head of investment banking research at UBS, says clients want equity research more than ever. Hussein Malik, co-head of global research for JPMorgan, says they now want a different kind of research: “Increasingly, clients want real-time access to analysts to discuss their specific issues – right here, right now. They don’t want scheduled conversations or marketing events in the coming weeks. Customers ultimately want to be directly connected to our internal and external community of experts and real-time information. (Institutional investor)
Bank of America has cut jobs and it is welcomed like a ray of sunshine by Mike Mayo, analyst at Wells Fargo & Co. (Bloomberg)
Morgan Stanley paid James Gorman $35 million in 2021. (Financial Times)
Trading revenue is expected to fall to a new normal this year. (Reuters)
Photo by Nicola Fioravanti on Unsplash
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