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Please, Sir, I Want Some More.


Trick No. 2: Tell people, unless it’s blatantly obvious otherwise, that they’re being paid “outside the top of the range.” This has a few beneficial effects. For starters, it makes the employees feel pretty good—at least temporarily. Second, it makes them even more reluctant to share their compensation around the water cooler. “Everyone was always telling me how great I was and that I was the only person in my division in my class being paid outside the top of the range,” says a former vice-president in Goldman’s equities division. “I ended up not wanting to ask people, because if it was true, and my number got around, it would be obvious it was me.”

As money-obsessed as Wall Street is, the taboo on discussing your own compensation remains very serious at firms like Goldman. At a conference several years ago that was being addressed by Jon Corzine—then head of the firm and now governor-elect of New Jersey—a vice-president I used to work for in corporate finance had too much to drink, stood up, and jokingly chanted something along the lines of “More pay! More pay!” He was met with looks of horror by the entire division and a withering stare from Corzine himself. That man, who by rights should have made partner at the firm given the revenue he brought in, never did get there. Everyone in the division remembers the incident. “A career-limiting move of epic proportions,” recalls an ex-colleague.

Trick No. 3: Because bonuses are based on everything from the performance of the firm down to the division and the individual, there’s always something else to blame when someone gets the shaft. “There was always an excuse about why you weren’t getting as much as you expected,” says the former equities VP. “If it wasn’t the division, it was your group; if not that, the firm itself.” Goldman’s problem this year: The firm seems to be hitting on all cylinders, so everyone expects a big payday.

One of the reasons secrecy about bonuses is maintained is that the only thing worse than being shafted is having your colleagues know you’ve been shafted.

Everyone, it should be noted, really means everyone. Goldman secretaries, I am told, now make anywhere from $50,000 to $75,000 a year—depending on whom they work for and their level of experience—and tend to earn anywhere from 10 to 25 percent more as bonus. The firm’s undergraduate hires, or “analysts”—which is what I was in the early nineties—now make $70,000 a year, with the potential bonus of $75,000, according to the career Website Recent M.B.A. graduates, or “associates,” tend to make $95,000 or more and also have a shot at an equal amount as a bonus. Those numbers are pretty much Streetwide—like airlines, investment banks tend to move in lockstep when it comes to paying their grunts.

What doesn’t move in lockstep is the performance of the various businesses at Goldman, which are divided into four main groups: investment banking, asset management (known as GSAM), equities, and FICC (fixed income, currency, and commodities). All four divisions fight each year over that remaining 35 percent of net revenue, and the money tends to go to those divisions—and the business units within them—that are outperforming at the time.

The Goldman of today is a very different place than when its investment-banking franchise—still the envy of Wall Street—was the company’s crown jewel. As evidenced by the ascension of trading veteran Lloyd Blankfein to president, the banking division has been thoroughly eclipsed by the company’s traders, so much so that Goldman is now jokingly referred to as a hedge fund with an investment-banking arm stapled onto it.

In the third quarter of this year, the company’s trading and principal investments (both equities and FICC) pulled in $5.1 billion in revenue, 69.5 percent of the firm’s total; asset management and securities services, $1.2 billion (16.6 percent); and investment banking, $1.02 billion (13.9 percent). Although it’s the first time the investment-banking division has topped $1 billion in quarterly revenue since the third quarter of 2001, it’s quite clear where the bulk of the money’s going to go: to the company’s traders, particularly those who make massive bets with the firm’s own capital.

Ultimately, it’s those traders who are the toughest to replace. Depending on which “desk” they sit at—risk arbitrage, credit swaps, equities, and many others—these people operate almost like free agents within the firm, their market bets bankrolled to the tune of hundreds of millions of dollars. Although investment bankers can be—and often are—replaced, a talented trader is an asset worth paying to keep. And that goes for their off years as well. “Traders go hot and cold,” says Kessler. “But you’ve still got to pay them enough in the cold years if you want them to be around for the hot ones.”

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