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Goldman staff may get a lot less than they’re expecting

As you’re undoubtedly aware, the compensation accrued by Goldman Sachs for the first half of the year suggests that, all things being equal during the second half, the average employee will end 2009 rich beyond some of his/her less moderate dreams.

However, Rochdale Research analyst Dick Bove has a warning for Goldman bankers who are salivating at the prospect of this year’s compensation: it may be illusory.

According to Bove, Goldman often does this. Accruing compensation in the first two quarters is simply an accounting device:

Personnel expenses are a different matter. They were up a massive 47% year over year and 41% sequentially. The increase may reflect a change in company profit performance. It may represent a new ability to pay people now that the TARP preferreds are gone. Or, it may be that Goldman uses this expense line to manage earnings.

While the company disagrees strongly with this last view, I believe just as strongly that it is true. Every year, Goldman in the seasonally strong quarters, dramatically over estimates its compensation expenses. Then in the fourth quarter, it slashes those expenses as it presumably adjusts the category for mistakes made in estimating earlier in the year. This year is no different. Fourth quarter compensation expenses could easily drop by $2 billion.

Comments (4)

  1. They say, birds of the same feathers flock together. Sarah Butcher is the new Goldman Sachs, and Goldman Sachs is the new Sarah Butcher. Glad to get that off my chest!!

  2. Thank you Niv.

    Sarah, Editor, eFinancialCareers Reply
  3. Sarah, you just couldnt resist could you.

  4. when you go interview there nowadays you get every interviewer state and press home how ethical the bank is. then they begin to desperately info-fish. quite entertaining.

    i do hope the CIA isn’t monitoring this site for anti GS comments. i don’t want to end up in guantanamo. henry’s on here so much that his bosses may have called in the FEDs on him too

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