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According to The Wall Street Journal, some of Goldman Sachs's (GS) largest shareholders are petitioning the company to lower the size of its bonus pool. These shareholders feel that GS should be passing along more of its earnings to investors. According to "people familiar with the situation," these investors hold "tens of millions" of GS shares and are complaining in private conversations at GS's annual analyst meetings.With GS raking in record net income and compensation, the shareholders believe that the benefits should be shared among them rather than in compensation and benefit for the employees. The shareholders are also concerned about a minute change in the firm's financial statements regarding how the company counts the number of employees.
Apparently, these changes increase the company's number of employees by adding temporary employees and consultants. Adding these to the company's employee roster, makes it look like the company's employees make less than they do. Thanks to this new counting practice, GS's employees earned $717,000 apiece in 2009 (coincidentally, where do I send a resume GS?). Excluding temporary employees and consultants per-employee compensation is roughly $775,000. GS insists that it hasn't adjusted the numbers. GS says it always included temporary employees and consultants, but they weren't counted in employee totals.
The bottom line is that shareholders want more of the money that the company makes, and the company does not want to share. Some have suggested rewarding shareholders with a one-time dividend rather than buying back shares, but this scenario is unlikely. What is interesting is that these shareholders, who usually shy away from debate over Wall Street pay, are now delving into the issue.
What do you think? Should the shareholders be rewarded for sticking with the company? Or should the executives be rewarded for pulling in record net income and compensation in the midst of the current financial crisis? I think that shareholders deserve a bit of the payout. They stuck with the company rather than bailing ship at the first sign of trouble (and there have been plenty of those). Reward them for their loyalty.
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Reader Comments (Page 1 of 1)
11-20-2009 @ 10:50AM
GB said...
I have wondered for years why stockholders and boards allow this "management for management's sake" to continue. It is about time they stood up for their own rights!
There needs to be a separation of management and the board too. Executives should be responsible to the board, not voting members of it.
11-20-2009 @ 10:54AM
Crontab said...
If they want a payout, they can use GS services to invest their money. You don't buy stock for the dividends, you buy it for the long-term gain.
11-20-2009 @ 11:14AM
GB said...
Increase in stock value and dividends are both relevant and valuable to the stockholder.
I just finished reading, "The First Tycoon: The Epic Life of Cornelius Vanderbilt". A great book, by-the-by. How did he make all that money? He bought the stock in huge quantities, then made it pay dividends. It didn't hurt his finances that the price of the stock usually went way up too.
11-20-2009 @ 11:41AM
clikdawg said...
"The bottom line is that shareholders want more of the money that the company makes, and the company does not want to share."
Always entertaining when thieves fall out ...
12-01-2009 @ 1:23PM
blosmurph said...
I think the U.S. taxpayer should get his/her cut for saving all their butts by paying 100 cents on the dollar for their $13 billion dollars in phony credit-default swaps. Does it occur to the shareholders or the "vampire squids" that Goldman wouldn't exist without stealing $13 billion from U.S. citizens? This is a war: Corporate America vs. American People. Starting with Paulson on down, they deserve jail time. Bonuses? Get in touch with reality, folks.