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Please, Sir, I Want Some More.

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Goldman Sachs's $29.8 million CEO Hank Paulson.  

The remaining $1.15 billion is then split among the PMDs according to the discretion of the top dogs, who evaluate each partner. “Having such a huge part of the partners’ pay package be discretionary is different from the way it used to be,” a former vice-president of the firm told me. “If there are partners they want to push out, they just fuck them on the discretionary part.”

For those in the highest standing, the estimated numbers run in the neighborhood of $20 million to $40 million. So massive are these sums that a secretary in the London office was able to steal £4.5 million from three of her bosses before they even noticed. In the meantime, she’d bought an Aston Martin, a villa in Cyprus, and £350,000 worth of Cartier jewelry.

Though the firm is very discreet about its discretionary bonuses, the requirements of being a public company have forced Goldman to reveal the compensation of its executive management team. They’re a well-paid lot, though not necessarily the best-paid at the firm. Last year, Paulson took home $29.8 million for his troubles, while Lloyd Blankfein, the firm’s president, made a shade less, $29.5 million. David Viniar, the chief financial officer, got $19 million, and vice-chairmen Robert Kaplan and Suzanne Nora Johnson scored $17.5 million apiece.

EMDs, for their part, might make anywhere from $1.75 million to $3 million, according to a knowledgeable employee at a rival firm. “Those guys are almost paying a fee to work at Goldman,” he says. “That’s one thing that hasn’t changed. Goldman is split between the haves—the PMDs—and the have-nots, which is everyone else.” That first point is only partly true, because when Goldman gave up the carrot of the partnership to motivate its employees, it received something in return: publicly traded stock. With an increasing part of its compensation coming in the form of stock grants that vest over time, EMDs still have a fancy set of golden handcuffs keeping them tethered to the firm. And though Goldman shares haven’t exactly rocketed to the moon since 1999, they have outpaced the Dow and the S&P 500.

So what of everyone else? Generally speaking, the remaining 35 percent of net revenue is split rationally at Goldman, based on a series of narrowing considerations: the performance of a particular division within the firm, the business unit within the division, the individuals themselves, and, increasingly, what you need to pay them to keep them from jumping ship. “You try to determine how much you have to pay to ensure their loyalty,” says a former EMD in Goldman’s fixed-income division who left the firm in early 2005. “Except at very senior levels, they’re almost always trying to find that point of indifference. Goldman is paying you $1.25 million and Lehman is dangling $1.5 million? After tax, what is that—150 grand or so? Is it worth switching? Without ever explicitly saying so, that’s precisely what Goldman tries to do—to find that number where someone says, ‘Screw it. It’s just not worth it to move.’ ”

Although the past five years have seen a huge amount of traffic from old-line investment banks to hedge funds, executive recruiters say that movement has slowed somewhat. The spate of hedge-fund scandals and spotty performance in 2005 will likely slow it even more. But that doesn’t mean Lehman Brothers and other investment banks aren’t chasing after Goldman’s top talent—and vice versa. “There’s a talent war out there in areas like derivatives, commodities, investment banking, and proprietary trading,” says Michael Karp, co-founder of executive-search firm Options Group.

So how do they keep their people from bolting when they find out the guy at the next desk got paid a little more? Trick No. 1: Demand secrecy. It’s not as difficult as it sounds; the employees themselves have an interest in not advertising their own bonuses. The only thing worse than getting shafted, after all, is having your colleagues know you’ve been shafted. “Everybody on Wall Street plays poker when it comes to compensation,” says that former EMD. “Even if you’re positively surprised, you hide it, because you want them to feel that was the least you expected.”

A current vice-president at the firm says that because everyone gets the news on the same day—“compensation day,” which is generally in the first half of December—the entire firm gets consumed in a frenzy of trying to read each other’s reactions. “All the offices have glass walls, so everyone is trying to read everyone else’s face, especially when they’re in there getting the news,” she says. “You wonder, Does she look happier than me?”

When I worked in Goldman Sachs’s investment-banking division in the early nineties, I knew of a group of more-senior employees who would sit together at the division’s annual party each year and throw their compensation numbers into a hat. A designated person would calculate the average and tell it to the table, just so all knew where they stood. But that was the extent of it—the actual numbers were not shared.


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