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CNBC's Charlie Gasparino reports that "Rival banks are eagerly awaiting this week's earnings announcement from Goldman Sachs (NYSE: GS) not only for the third-quarter results but for how the firm deals with up to $20 billion in bonuses just a year after it received federal bailout money during the height of the financial crisis."
With third quarter earnings expected to ring in at more than $2 billion, Goldman is prepared to pay out some hefty bonuses. The problem? Given that Goldman Sachs received a taxpayer bailout only a year ago, paying out massive cash bonuses now could lead to a significant public relations backlash.
Gasparino reports that Goldman may seek to assuage this concern by paying out a large chunk of its bonuses in the form of company stock rather than cash, thereby tying the value of compensation to the long-term health of the company.
That may make sense, but I have an idea for how Goldman can deal with the negative publicity: Ignore it. Goldman Sachs is not Wal-Mart (NYSE: WMT); it doesn't depend on the goodwill of millions of consumers in order to profit. Goldman doesn't have a strong retail operation, and generates profits mainly through trading, investment banking, and wealth management for uber-net worth families.
Sure: It's never fun when people are saying mean things about you. But Goldman Sachs' business model doesn't make its reputation among the masses important. As long as its cadre of clients still have faith in its ability to make them rich, Goldman can prosper.
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Reader Comments (Page 2 of 2)
10-12-2009 @ 10:05PM
BailoutShmailout said...
1. Goldman Sachs was FAR from bankrupt during the Lehman crisis. They may have taken a loss, but but it didn't mean they were in debt.
2. Goldman Sachs Execs DID NOT receive a bonus at all last year. Maybe you've confused them with AIG.
3. Goldman Sachs PAID BACK the tarp that was forced upon them by the FED. The only reason why they needed the tarp to begin with is because the FED forced them into becoming a bank holding company, and by this new standard there was a minimum of cash they needed to have on hand. This so called bail out was paid back by the next quarter! No tax payer dollars are going toward bonuses.
4. It's been a pretty rough year, and these people deserve bonuses. They DO NOT get paid for over time like unioned workers. They work 70 hr weeks and during times like Lehman, employees came in on weekends and and didn't go home to their families. The least these people deserve is a fat bonus at the end of the Year.
With that said, Goldman Sachs has triumphed through extremely rough times and persevered where many others have failed. Lloyd should be very proud and deserves a fat bonus. Everyone else is just hating. People hate to see others succeed when they're down. But you know what, it's survival of the fittest and only the strong survive.