What are our friends up to at Goldman these days. Let’s see.  They’re busy making money in an environment where a large portion of their competition no longer exists. Fair enough. Capitalism at work.  The weak perish, and the strong get stronger. But what of employee compensation? They’re busy rewarding themselves at the expense of the business owners (shareholders).

There are a few things we can draw from the recently released Goldman data :

• The gross margin of this business is surprisingly large.
• More importantly, look at the portion of revenue that went towards employee compensation vs earnings (money that could be returned to stock holders) in 2008 and 2009. Very nearly 50% of revenue goes to employee comp. This is 2-3X the amount of money returned to shareholders. Shareholders are the business owners. They take the risk and put up their capital to run the business.
• Any guesses as to what the average pay will be for GS employees this year? $775,000.  That’s the amalgamated average pay. The CEO (Lloyd Blankfein) is playing games trying to get that number to appear lower because he is concerned about bad press. He has changed the way employee comp is disclosed so that it now includes compensation/ benefits paid to part-timers and contractors. This has the effect of lowering avg comp to $717,000. That’s much better, Lloyd. I’m a lot less outraged now.
• GS employees are getting 46% more pay this year vs last year. Nice work if you can get it.