Goldman Sachs could face exodus over shallow bonus pool: sources

Goldman Sachs could face exodus over shallow bonus pool: sources

The bonus pool at Goldman Sachs isn’t looking as large and deep as CEO David Solomon hoped — and that could leave the bank scrambling to prevent a bigger-than-expected talent exodus this spring, sources told On The Money.

Some managers at the Wall Street giant had quietly assured the rank and file in recent months that annual bonuses this year will be better than last year’s dismal payout, when a post-pandemic crash in dealmaking tanked the bank’s results, according to sources.

Now, however, some managers are looking to walk that promise back following earnings that have continued to languish, slammed by major asset writedowns and a persistently dry market for deals. 

As management crunches the numbers and finalizes compensation, top brass has come to realize it simply doesn’t have enough money to give every banker a bonus that will make them stay, according to insiders.

“They know they f–-ked up compensation a year ago and so they promised people if they stayed they’d pay them,” a source with knowledge of the compensation process said. 

“But the cold, hard reality is when you look at the revenue pool, you don’t have enough money to make the numbers work.” 

Goldman Sachs logo
Goldman Sachs has been slammed by major asset writedowns and a persistently dry market for deals.  Paola Morrongiello

Indeed, management in 2022 had painted the bonus drought as a one-off, sources said.

Unfortunately, that doesn’t appear to be panning out.

“The bar was so low for giving people a small percentage uptick” that managers were certain 2023 would be better, a source said.  

“Managing expectations is not their strong suit,” the source added. 

Goldman is still discussing what bonuses employees will receive and has yet to finalize specific compensation, a source close to the bank said.

“Our compensation philosophy hasn’t changed, we’re always focused on investing in our people, especially our top performers,” a spokesperson for Goldman Sachs said. “We’re not going to comment on premature speculation around the compensation cycle.”

The bonuses typically make up a majority of a bankers’ compensation. For junior employees, bonuses can hit six figures.

Mid-level bankers can haul in hundreds of thousands and those at the top will receive seven or even eight figures.

On Wednesday at the Financial Times Global Banking Summit, Solomon responded to a question about the upcoming bonus season, saying, “The competition for top talent is still pretty intense and so that has an impact on how we make judgements but we’ve done this, I’ve been doing this for a very long time, we do it every year, we do what’s right for our employees, we do what’s right for our shareholders, there’s always a balance in that.”

Earlier this month, Reuters reported that Goldman will cough up the cash to pay star performers.

The problem, according to sources, is that not all of them will make the cut, with some strong employees at risk of getting lower payouts this year than last. 

At the same time, many young bankers have inflated expectations after receiving record bonuses for the 2021 fiscal year.

Goldman CEO David Solomon
Bonuses aren’t as large and deep as Goldman CEO David Solomon hoped. REUTERS

Those payouts had been fueled by record earnings — and a willingness to pay top dollar amid a labor shortage that led to a war for talent.

But last year, “comp talk day,” as some call it, was accompanied by an awkward conversation as managers read to employees from a script provided by Human Resources that aimed to help Goldmanites “understand … the current financial constraints the firm is under in the market environment we are in.”

Bankers saw a dramatic drop-off industrywide, with many getting 30% less than they did the previous year. At Goldman, some saw their bonuses drop 90%.

To be sure, bankers across Wall Street will be facing similarly dismal bonuses. 

A report from compensation consulting firm Johnson Associates this month predicted bankers could see bonuses dropping 15% to 25% after last year’s carnage.

At some firms that number could be closer to about 10% lower, sources add. 

“People will be shocked and appalled,” a source said of the upcoming bonus season. “They’re taking a risk but the pay at JPMorgan and Morgan Stanley isn’t going to be much better.” 

Alan Johnson, head of Johnson Associates, told The Post banks typically keep mum on figures ahead of bonus season.

“Firms try and send general messages but avoid putting out specific numbers because you don’t want people to know that level of detail about other people’s compensation.”

It’s a high-stakes decision for any firm when it comes to doling out compensation, Johnson said.

“Banks go around and around about how much of a risk it is to lose a person,” Johnson said. “You need to figure out the people you need to have to be the least unhappy. And you want poor performers to be the most unhappy.”

But unlike Goldman, sources at other banks say they have a far more accurate view of what they can expect.

“Attrition of good talent can very easily turn a good place bad,” a source said. “You wake up one day and you’re Wells Fargo.”

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