Why Goldman execs are not overpaid

People rant about the company's outrageous employee compensation, but the facts don't support the outrage.

By TheStreet Staff Jan 20, 2010 12:26PM

TheStreetDebt collector © Rubberball / Getty ImagesDan Freed, TheStreet

 

Don't get me wrong. I hate Goldman Sachs (GS) as much as the next guy.

 

I am troubled by the widening gap between rich and poor in the U.S. I hate the fact that people who make computer programs that allow them to buy Apple (AAPL) shares for a penny less than the next guy can easily earn 20 times what a high school math teacher takes home.

 

But the debate about how much Goldman pays its executives is not a big social debate. It is a narrow debate about a company and whether it is earning returns for its shareholders -- and guess what. Goldman is doing a far better job than its competitors.

 

Pull up a stock chart and take a look at virtually any period you like. Goldman has consistently outperformed competitors like JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC) and Morgan Stanley (MS).

 

Ready to get started? Browse our New Investor Center

 

A big reason for that performance is that Goldman executives get a lot of their compensation in stock.

 

"We'd all love to be the lavatory attendant at Goldman Sachs, given the average compensation of the firm," says Brad Hintz, analyst at Bernstein Research. "But let's face it: They own their own company, so the motivation of the partners is not to overpay their employees."

 

Goldman's stock has not outperformed the competition by a small margin. Over the past five years through Tuesday's close, Goldman shares had returned 60% -- more than four times the performance of JPMorgan. Are Goldman executives paid four times their counterparts at JPMorgan? I doubt it.

 

So tell me all bankers are overpaid. Tell me President Barack Obama should triple the size of his proposed tax on bank liabilities. But stop picking on Goldman executives, because -- and this is tough to say -- they don't deserve it.

 

Related Articles

 

Morgan, Goldman rivalry heats up

 

Bank tax could benefit small lenders

 

Goldman lends a (small) helping hand

 

 

 

39Comments
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

117
117 rated 1
280
280 rated 2
478
478 rated 3
656
656 rated 4
650
650 rated 5
640
640 rated 6
647
647 rated 7
482
482 rated 8
277
277 rated 9
126
126 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.