Morning Coffee: Why Goldman Sachs bankers don't deserve to be paid the most. Old school cost-cutting at Merrill Lynch
Does Goldman Sachs pay the most? That all depends upon whose statistics you look at. If you compare the average pay per head figures released by banks themselves, then Goldman is certainly among the most remunerative employers: it paid an average of $345k in 2015, compared to $298k at Credit Suisse's investment bank and $242k at Barclays'. However, if you look at pay comparisons produced by the likes of Emolument, then Goldman looks less generous: J.P. Morgan, Morgan Stanley and Deutsche Bank all pay their managing directors more than Goldman Sachs does.
And yet, Goldman still rules the roost in terms of pay for senior executives. CEO Lloyd Blankfein was awarded $30m in 2015. This was slightly below Blankfein's pay for 2014, but Bloomberg reports that this still made him the most generously rewarded executive on the whole of Wall Street last year. Goldman investors are not happy as a result: 33% of them just voted against the bank's 2015 compensation plan, compared to the 2% who voted against it for 2014.
So, why don't Goldman's senior executives deserve to be more lavishly treated than their peers? Goldman shareholders were reportedly peeved about the $5.1bn fine Goldman paid last year to assuage allegations that it didn't properly investigate mortgage-backed securities before it sold them as high quality debt during the boom years. That's not all though - Goldman's share price flat-lined in 2015, compared to a 6% increase at J.P. Morgan and a 16% increase at Morgan Stanley, and while firm won market share in equities and M&A, it lost market share spectacularly in fixed income currencies and commodities (FICC) last year. Fortunately (or unfortunately, if you work there), Goldman is already heeding the need to curtail its compensation: pay accruals fell by a massive 43% per head in the first quarter of 2016...
Separately, who cares about hiring freezes and encouraging senior staff into retirement when you can cut costs by putting red dots on things? This is reportedly what Daniel Tully, a recently deceased former executive of Merrill Lynch did in the 1990s. Faced with the need to extract expense from the business, the WSJ says Tully, 'roamed the headquarters and stuck red dots on office equipment and furniture. Unless employees could prove within 24 hours that the gear was needed, it would be hauled away..'
“People hid from me,” Tully said, “They were afraid I’d put a red dot on their forehead...”
Morgan Stanley just made its head of equity syndicate head of fixed income syndicate too. (WSJ)
“For the last three or four years, on a regular basis, there’s been misbehavior at Deutsche Bank.” (Bloomberg)
Revenues fell 37% at Winton Capital last year, but the compensation pool rose by 79% and someone earned £11m. (Financial News)
Morgan Stanley is moving about 75 jobs from its operations team in Shanghai to India and Hong Kong as it seeks to improve back-office efficiency. (Bloomberg)
Goldman executive offers advice on clammy hands at networking events: Hold your drink in your left hand so your right hand won’t be wet and clammy when shaking someone’s hand. (Goldman Sachs)
How to tell someone’s age when all you know is their name. (FiveThirtyEight)
There’s no point learning to code any more. (NYMag)
When men make better golfers than women. (GolfDigest)
Photo credit: Money by Nick Ares is licensed under CC BY 2.0.