Goldman Sachs shows the way

January 21, 2010 | By Jim Kim

Goldman Sachs (GS) thoroughly trashed analysts' expectations, posting earnings of $8.20 a share versus expectations of $5.20 a share. This gave the stock an early shot. Investment banking and trading were strong, but the big news was the company's willingness to cut back on how much it pays employees, which I have to say is somewhat impressive.

For all of 2009, the company has set aside $16.2 billion, which was lower than expected. Some people thought it would pay well over $20 billion. Compensation accounted for 36 percent of Goldman's $45.17 billion in 2009 revenue, the lowest annual ratio ever for the company, the AP notes.

In 2008, Goldman set aside 48 percent of revenue for compensation. Employees may be miffed, but they are not likely to voice disapproval publicly; Lloyd Blankfein will see to that. The hope is that by giving more to shareholders, the stock will keep moving north, which will make this a win-win.

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