By Maggie Astor: Subscribe to Maggie's RSS feed
October 21, 2011 2:49 PM EDT
Goldman Sachs has set aside $10 billion for compensation and bonuses this year, it announced on Oct. 19 -- the same day it reported a third-quarter loss of $428 million.
It was only the second time that Goldman Sachs reported a loss since it became a public company in 1999, but the company's struggling finances had a remarkably small impact on the bonus total, which is sure to grow even more in the fourth quarter of 2011.
The $10 billion figure is 24 percent less than the bonus pool at this time last year, but if the bonus pool actually fluctuated based on the company's profits, it would have decreased by 70 percent, because that's how much Goldman Sachs's profits have declined since 2010.
The company's stock, meanwhile, has fallen by 43 percent since the beginning of 2011, and 1,300 employees were laid off in the third quarter alone, with 1,000 more layoffs expected by the end of the year. It doesn't seem unreasonable to say that if executive bonuses were lower, some of those layoffs could have been avoided. Goldman Sachs (GS) shares traded Friday up 39 cents to $101.25.
Is Goldman Sachs' 2011 Bonus Plan Justified?
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The CEO of Goldman Sachs, Lloyd Blankfein, struck a quasi-populist note in 2009, when he said it was "understandable and appropriate" for people to be upset by huge executive bonuses.
"There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year," he said at a banking conference in Frankfurt, Germany.
Goldman Sachs may not have lost money this year, but it certainly lost money this quarter, and the amount set aside for bonuses should have decreased accordingly.
This is exactly the sort of news that bolsters the Occupy Wall Street protesters' argument that there is a fundamental disconnect between the interests of big business and the interests of regular Americans.
In 2010, the median paycheck in the United States decreased by 1.2 percent, to $26,364 -- the lowest level, adjusting for inflation, since 1999, Reuters reported.
Meanwhile, the number of Americans making $1 million or more a year rose to 94,000, a 20 percent increase from 2009, when 78,000 workers made that much. And the number of people in the highest echelon -- those making $50 million or more a year -- rose by 12.5 percent, from 72 to 81.
All told, since 2009, corporate profits have accounted for 88 percent of all income growth, and wages have accounted for only 1 percent. Clearly, the problem with our economy is not that big business is doing poorly -- it is that big business is doing exceptionally well at the expense of ordinary workers.
How is that not class warfare?
Contact Maggie Astor at m.astor@IBTimes.com.
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