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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Tuesday, January 17, 2012

Goldman Sachs and Salaries and Bonuses

Today's posting is made up of two articles which when juxtaposed present not a few questions. Does Goldman Sachs have two separate ways of deciding on pay depending which country the bank works in? Why would anyone think that one method is superior, or even fairer, than the other?

These articles serve to show how inappropriate bank pay is compared to the 99% of the population. Greed knows no bounds.

But first, a chart of inequality from Wikipedia called File: Inequality-by-Kenworthy.png:

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The Invisible Hand Behind Bonuses on Wall Street
By Kevin Roose - The New York Times (at Yahoo! Finance)

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Mr. Johnson, a consultant who speaks with a light twang from his native Alabama, has never worked for a bank. Nor will his company, Johnson Associates, pay million-dollar bonuses to any of its 12 employees this year. But as one of the nation’s foremost financial compensation specialists, Mr. Johnson is among a small group of behind-the-scenes information brokers who help determine how Wall Street firms distribute billions of dollars to their workers.

“The misunderstanding many people have about this industry is that pay is whimsical,” Mr. Johnson said in a recent interview at his company’s Manhattan office. “It’s not.”

Compensation consulting is an obscure corner of the management consulting industry, where practitioners operate in the shadows of high finance. Large Wall Street banks, as well as hedge funds and private equity shops, rely on such consultants to help them structure bonus payouts and devise severance packages, and to provide data on what competitors pay.

“You can give them some insights,” Mr. Johnson said of his clients, who have included the boards of Credit Suisse and Lehman Brothers. “You can say to them, ‘You’re being too wimpy this time,’ or, ‘You were being too aggressive last time.’ ”

This year’s bonus season, which began in late December and will continue until February at some companies, is expected to be the worst for industry employees since 2008, as regulatory measures and economic uncertainty have cut deeply into profits and made pay pools smaller.

In his annual compensation survey, a closely watched report that was sent to roughly 800 of the company’s clients in November, Mr. Johnson estimated that bonuses in the industry would fall 20 to 30 percent from last year’s levels.

That would still leave employees at firms like Goldman Sachs, where the average worker took home $430,700 in total compensation in 2010, much better off than workers in other industries. But it would represent further slippage from the sector’s highs before the crisis.

Bonus math in a financial downturn is a delicate art. Because the payments typically make up at least half of an employee’s yearly pay, erring on the low side can mean losing a star performer to a rival firm.

“Someone on Wall Street might go apoplectic when he heard he got $3 million and another guy got $3.5 million,” Mr. Johnson said.

Decades ago, banks determined bonuses according to a relatively simple formula that took into account an employee’s seniority and performance. After the financial crisis, as politicians and regulators began criticizing what they saw as eye-popping pay packages, those all-cash bonuses went out of fashion.

Now, Wall Street pay packages routinely include deferred cash payments and restricted stock awards that can be redeemed only after multiyear waiting periods.

The increased complexity of Wall Street compensation has been a boon for consulting businesses, which can charge hundreds of thousands of dollars a year for advice. Goldman Sachs has used the consultancy Semler Brossy; Morgan Stanley’s directors have relied on the Hay Group; and Bank of America’s board has used the services of Frederic W. Cook & Company, according to public filings by those banks. All three consulting companies, and all three banks, declined to comment.

Read the rest of the article here

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Goldman Sachs forced to reveal pay of top London staff

EU rules have forced Goldman Sachs, which publishes full-year results on Wednesday, to disclose it pays its top UK staff an average of £4m

By Jill Treanor - The Guardian Business Blog

Ahead of the full-year results from Goldman Sachs on Wednesday it is worth taking a look at what the Wall Street firm paid its top flight staff in London in 2010. For the first time it has been forced to disclose, under EU rules, how it pays so-called "code staff" – those who are judged to be responsible for taking or managing risks – in its UK-based operations.

Regulatory filings for Goldman Sachs Group Holdings (UK) show that it had 95 code staff in 2010 who shared $269.5m (£175m) in cash (including salaries) and were handed 2m restricted stock units (RSUs), worth $320m at the $160-ish share price in 2010. At these prices – and it is an inexact science as the RSUs pay out over five years and their value will depend on the share price in the future (it is currently $98), this suggests an average pay deal of $6.2m for each of the 95, none of whom is identified by name.

A further 3.7m RSUs – which on the same basis were worth around $595m – were awarded during 2010 in "deferred compensation" to the code staff in one-off retention packages put in place by Goldman during 2010. Their exact value will not be known for five years.

As is always the case with pay deals, comparisons are tough. Even agreeing on a definition of code staff is tough. For instance Barclays disclosed last year that it had 231 code staff while RBS reckoned it had 323 who fitted the definition. At Barclays they received an average of £2.4m each during 2010 and had another £606m stored up in "unvested remuneration", while at bailed out RBS, the 323 received an average of £1.1m.

The Goldman numbers relate to 2010 – but still provide an illustration of how pay deals are constructed in the City.

Read the article here


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