It was a good move by Goldman Sachs (GS) to seek an audience with shareholders when it comes to compensation issues. The bank is right to carefully lay the groundwork for the big round of bonuses that are inevitable. The bank has set aside $16.7 billion for pay so far vs. $16.9 in 2007. The total could be more than $20 billion. It will be tricky.

The bank recently posted a PowerPoint presentation that aims to offer some background rationale. It notes that over the years there has been a strong correlation between compensation growth and revenue growth. "The slight discrepancy is principally driven by years in which revenues grew more significantly than compensation, with the corresponding benefit accruing to shareholders." This may be another one of those years.

Some analysts think the bank will be forced to reduce its ratio of compensation from nearly 50 percent so far this year. It would be wise to keep the payouts under $20 billion and thus below 2007 levels. And it needs to continue to keep the lines of communication open with constituents. The worst thing it can right now--in the face of a lot of really negative press and government skepticism--is to dig in. For example, the idea floated by some executives that the bank could have withstood the crisis without TARP aid has been at odds with other, previous pronouncements--and stands as another blunder. 

For more:
- here's an item on compensation from The Guardian 

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