But for Goldman’s chief executive, Lloyd C. Blankfein, this is turning out to be a very good year. He will surely earn more than the $54.3 million he made last year. If he gets a 20 percent raise – in line with the growth of Goldman’s compensation pool – he will take home at least $65 million. Some expect his pay, which is directly tied to the firm’s performance, to climb as high as $75 million.
This contrast in performance has been hard for competitors to swallow. The bank that seems to have a hand in so many deals and products and regions made more money in the boom and, at least so far, has managed to keep making money through the bust. In turn, Goldman’s stock has significantly outperformed its peers. At the end of last week it was up about 13 percent for the year, compared with a drop of almost 14 percent for the XBD, the broker-dealer index that includes the leading Wall Street banks. Merrill Lynch, Bear Stearns and Citigroup are down almost 40 percent this year.
Interesting story with at least a couple of good points to remember. First it does make a difference what company you chose. There are many market conditions where anyone can make money, but those conditions will change. Also look at the type of pay these people get. The CEO’s take huge risks to possibly get even more obscenely paid. It is absolutely no surprise to me the companies write off hundreds of millions in losses. It happens constantly. Executives are paid ludicrous salaries. In order to try and justify them they take huge risks. When the gambles pay off they pocket even huger bonuses. When they fail they pocket huge severance packages. Who wouldn’t bet the future of the company for that kind of money. Some people wouldn’t but not many that fight there way to the top of the corporate world. Right now it is banks writing off hundreds of millions but just watch every year companies do it. It is not some isolated rare event – it is predictable, common happening.
And third the financal markets are much riskier than people think. Combine that with leverage and you get huge swings – huge profits and huge losses. I suppose some company may be able to guess just write about when to leverage and make the changes at just the right time – but I doubt it. A few great investors might be able too much of the time.