With profits surging, Goldman Sachs is set to pay its employees hefty bonuses, much to the surprise (and chagrin) of Wall Street observers. According to the New York Times, the holding company nee investment bank has already set aside $11.4 billion that it plans to award workers at year’s end.
The hefty bonus earmarks come after a strong first two quarters, in spite of laggardly performance across the financial sector. Analysts predict that Goldman will record profit of over $2 billion in Q2 2009, following a Q1 profit figure of $1.8 billion.
Dividing the $11.4 billion equally among Goldman employees would give each $770,000, about what was doled out during the market boom.
The plans to go ahead with hefty bonuses will certainly draw criticism from a public that won’t be likely to forget the $700 billion bailout, or the shows of repentance by Wall Street representatives. Some worry that Goldman’s example will reverberate through the financial industry, bringing firms back to the excessive payouts (and risk taking) of the pre-recession years.
“I find this disconcerting,” said Harvard’s Lucian Bebchuk. “My main concern is that it seems to be a return to some of the flawed short-term compensation structures that played an important role in the run-up to the financial crisis.”