Will Goldman Sachs Be Bulls, Bears, or Pigs?

There is no doubt that Goldman Sachs (NYSE:GS) is currently the preeminent shop on Wall Street. JP Morgan (NYSE:JPM) is a respectable second. I am not sure if there is a close third.

Despite Goldman’s resurgence, they have a major problem — that being their public image. What are some of Goldman’s issues? They include:

1. the firm’s close ties with Washington insiders . . .

2.their agggressive trading and risk profile . . .

3. the proprietary nature of their business . . .

4. the mere fact that they have made so much money (with the assistance and in the presence of Uncle Sam), while the economy continues to suffer . . .

Charlie Gasparino of CNBC addresses a number of these points as well as the fact that Goldman will likely face the public’s wrath when they pay out billions in bonuses come year end. The Goldman execs exacerbate the situation by playing the ethnic angle as Gasparino writes, Goldman Execs Blame Anti-Semitism. In my opinion, Goldman makes a huge mistake playing that card.

The fact is the public sees Goldman specifically and Wall Street in general benefitting from taxpayer dollars injected into the system along with a host of Fed and Treasury programs. While Goldman has paid back its TARP funds, they have still benefitted from financing backed by the FDIC. Moreso than direct benefits to the firm, Goldman has clearly benefitted indirectly from the gamut of Uncle Sam’s largesse.

Uncle Sam clearly has a large amount of ’skin in the game.’ Goldman can address its image and burgeoning reputation problem by increasing its own ’skin in the game.’ How can they achieve this? They should compensate employees in stock to a much greater extent and have that stock vest over a longer time period.

Typically, senior executives, traders, and bankers are paid approximately 35% in stock and the stock would vest over a three year time frame. As such, individuals would typically have one year’s worth of compensation tied up in the firm.

Let’s see Goldman pay people 65-70% in stock and have it vest over a 5 to 6 year time frame. If Goldman is concerned about losing people, that pay structure would serve as a real disincentive for other firms to hire Goldman people. Make no mistake, Goldman employees would NOT be happy to be paid in this format . . . BUT there would be plenty of people on Wall Street who would take that pay structure right now to work at Goldman Sachs.

Goldman has the opportunity through this bonus cycle to display whether they are bulls, bears, or pigs.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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