If someone were to hand us a bonus of $53.4 million ($27.3 million in cash, the rest in stock and options), chances are we probably wouldn’t turn it down. You can buy a lot of things with 53.4 million dollars, and we’re not saying the odds are high that something like that might happen in the next couple days but, for the purposes of this post, if it did, our response would probably be along the lines of, “Wow, that’s fantastic, now we can finally buy all those Cramer bobble heads, our plane ticket to Mexico for the Oaxaca World Series of Cockfighting Championship Match, our all-access pass to the Andrew Ross Sorkin Pleasure Palace, that puppy our parents promised us if we stayed at summer camp the entire month that year we were 11 and really homesick, and a hodgepodge of other equally great things” and not– “You know what? Thanks, but no thanks. Do you have any respect for us at all? Obviously not, or you wouldn’t be trying to hand us a bonus that’s missing about, and we’re ball parking it here, 14.6 million dollars. We’re so offended by this affront that you know what we’re going to do? We’re going to walk out that door and never come back.” But we probably won’t be in the position to offer either of those responses, any time soon. Probably. Lloyd Blankfein, on the other hand, is in that position, and Peter Cohan thinks he should go with the latter.

I think he should get $68 million. Goldman’s net income rose 70% in the last year but Blankfein’s compensation is only 46% higher than that of his predecessor who oversaw 23% net income growth. When his predecessor increased Goldman’s 2005 net income 23% over the 2004 level, he got a 29% boost (6% above net income growth) in compensation over 2004. So I figure Blankfein should have gotten 76% more — $68 million. In other words, Goldman stiffed Blankfein by 21%.
If Goldman’s board underpays its CEO, how can shareholders be sure he’ll stick around to boost the value of their investment in the future?

Goldman’s grossly underpaid CEO [Blogging Stocks]

We’re not sure how we overlooked this until now. On Sunday, Andrew Ross Sorkin, DealBook editor for the New York Times, penned an essay complaining that bonuses at Goldman Sachs were too high. Since we’re on record as defending Goldman bonuses, it only seems fair to bring you the other side of the argument.

…Goldman’s pay seems completely out of whack with its peers’.
Goldman’s compensation per employee, as mentioned earlier, is about $623,418. That’s nearly double what the average employee at rival firms earns. Lehman spent the equivalent of about $314,000 for every employee, and Bear Stearns spent about $320,000.
You could argue that Goldman Sachs makes its money more efficiently, and it does. You could argue that Goldman Sachs is in a different business than its rivals, and in some sense, it is: its biggest profits come from trading, not from investment banking.
But are its employees so much more talented than the rest of Wall Street that they deserve a “Goldman premium” of such huge proportions? That’s a tough case to make.

Well, yes. That might be true. But the opposite is also true.
Presumably Sorkin thinks some of the money being paid out in bonuses should go to shareholder equity. But we could ask the same question: are Goldman shareholders so much more talented investors than the rest of the investment community that they deserve a “Goldman premium” of such huge proportions. That’s a tough case to make.
Trying to find an objective measure of how much talent is worth is a kind of silly question. The reason why both are tough cases to make is that they aren’t possible to make. They ask us to point where on the big score board in the sky it says Goldman Sachs executives deserve so much money. But the big score board in the sky isn’t visible from down here, where we have to guide ourselves by market forces and the decisions of individual firms and investors.
Goldman’s Season to Reward and Shock [New York Times]

At Blogging Stocks, Peter Cohan examines why traders are putting their bosses to shame this bonus season. Lloyd Blankfein, for one, will probably earn a measly $50 million (loser), whereas Morgan Sze (big man on campus), head of GS’s principal strategies group in Hong Kong will go home with a check around twice that. Why? Cohan thinks it’s a matter of the banks recognizing hot v. hotter commodities, and their respective Plan B’s. Blankfein is, Cohan says, “stuck in his lousy $50 million job. He can’t go to another bank because the next highest payer, Morgan Stanley’s CEO, received 20% less– a mere $40 million.” But Sze, oh, the world is Sze’s oyster. He and other traders of his ilk are “prone to leave to start their own hedge funds where the average of the top 100 made roughly three-and-a-half times his bonus– or $363 million in 2005.” Goldman knows it can’t afford to lowball Sze, but has some leeway, in regards to his boss.
(Quasi-unrelated but too good to not mention:)

This kind of relative pay comparison is a source of real unhappiness. At Goldman, for example, 15% of the employees are unhappy because they got only a 20% increase in their bonus, rather than the 30% to 50% increase the top performers got. If that’s not bad enough, employees have to put on a good face because their managers add their reactions to news of their bonuses to their personnel records!

Why top traders outearn investment bank CEOs 2:1 [Blogging Stocks]

The bonus kings of Goldman Sachs are said to be in the principal stretegies group and Asia, according to the New York Post.
From the Post:

Several members of the $100 million club are in Goldman’s Asian offices. Morgan Sze, a head trader in Goldman’s principal strategies group based in Hong Kong, is mentioned by several sources as a possible member of the club.
Goldman’s principal strategies group makes bets on stocks and other securities using nearly $10 billion of the firm’s own capital.
Pierre-Henri Flamand, Sze’s counterpart in London, is also rumored to be receiving a $100 million bonus, as are some traders in Tokyo.
Raanan Agus, who is the New York-based head of the principal strategies group, could receive a bonus north of $70 million

As we noted on Friday, Goldman is actually paying historically low bonuses if measured as a percentage of total firm revenue. And the percentage of total revenues paid our for compensation is less than many of its competitors. This probably makes Goldman’s shareholders happy, especially the double-dipping alumni-employees who were partners when the firm went public. As we noted, this is leaving a few junior level people less than elated.

While some of the top traders and bankers at the firm raked in bonuses that were 30 percent to 50 percent higher than last year, some of the junior staffers were upset at receiving bonuses that were just 20 percent higher than last year.
“The discontent is pretty widespread among the junior ranks,” said one source. “About 15 percent of the firm is unhappy with their bonuses and 45 percent are just content.”

Bonu$ Baby Buzz [New York Post]