FT: Goldman WRANGLES over whether to pay juniors higher salaries

"Some senior executives have argued that boosting salaries mid-year would set a "dangerous precedent" and mark a break with the bank's "pay for performance" mantra, according to people briefed on the discussions."

"We should not participate in this game of moving salaries up and down every few months," said one person involved in the discussions. "If you behave like that you simply end up with mercenaries. We pay at the end of the year for performance." 
 

pour one out for GS13

ft.com/content/239631a3-c42d-4ce4-9dc5-1e3cc71ca0e9">https://www.ft.com/content/239631a3-c42d-4ce4-9dc5-1e3cc71ca0e9

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Comments (72)

  • Analyst 2 in IB - Cov
Jul 12, 2021 - 12:08pm

I would turn down a gs offer.  They clearly don't care about the juniors.  Go anywhere else and make more money with similar exit options 

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  • Intern in IB-M&A
Jul 12, 2021 - 1:15pm

Personally, would take every EB over GS without a regret

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  • Prospect in IB - Cov
Jul 13, 2021 - 8:52am

To hell with even the EBs in this context, I'd take most MS or JPM groups over GS right now, BOfA product too.

  • Analyst 2 in IB - Cov
Jul 12, 2021 - 12:17pm

"Dangerous precedent"?

Perhaps its a dangerous precedent to do NOTHING about your junior bankers working so hard they are having emotional breakdowns and they need to leak it to the press since the firm is doing NOTHING.

truly the vampire squid firm

Jul 12, 2021 - 12:45pm

Intern in IB-M&A

"If you behave like that you simply end up with mercenaries.

One of the most ridiculous things I've ever read when describing the thought process behind underpaying junior employees. It's fucking GS, not a non-profit. People are there to make money for themselves, not David Solomon. They're basically saying they want junior(!!) employees to prioritize GS shareholders over themselves lmfao. Giving abusive cult vibes.

CVP is probably the top-paying firm and it seems like their internal retention is as good as it gets.

Funniest
  • VP in IB - Gen
Jul 12, 2021 - 1:09pm

"If you behave like that you simply end up with mercenaries" 

LOL. What do they think this is the fucking Peace Corps? We only do this shit for the money

Jul 12, 2021 - 10:50pm

I want to say that it hasn't been the top job for a while but if we're talking strictly comp, then yes it would be top. But if we're talking over all? IB is bottom tier trash. Even M&I shits on it all the time, and the dude literally sells products on how to break into the industry despite his warnings telling others not to pursue it. Working 70-80 hour weeks doing mind numbing work and basically being a secretary is a pretty shit job.

Jul 12, 2021 - 11:02pm

Yeah they will be.  One day they'll realize that the only special/remarkable thing about them is how truly expendable they are, they'll have to start paying bills and taxes, and then they'll chase the biggest paycheck they can find like everyone else before them did. 

I come from down in the valley, where mister when you're young, they bring you up to do like your daddy done

  • Intern in IB - Gen
Jul 12, 2021 - 1:13pm

Yeah GS is becoming shittier by the day. Every article about compensation or culture the past 12 months seems to show their true colors

  • Associate 1 in HF - RelVal
Jul 12, 2021 - 6:15pm

I have yet to see you add value on this forum

  • Intern in HF - RelVal
Jul 18, 2021 - 4:35pm

Also the ones working much longer hours than 99.9% of the population

Jul 12, 2021 - 3:43pm

See, they say all this - but it's an answer in search of a reason. They won't do anything until Evercore and Morgan Stanley (their main competitors for talent) adjust their comp. Once GS starts seeing that yield drop, I'm sure they'll bump up and act like god's gift to their employees. 

Pretty sure the same thing was happening with Google / Apple until they were sued for AntiTrust.

Array

  • 3
Jul 12, 2021 - 7:52pm

Goldman Sachs executives are wrestling with the question of whether they need to bump up salaries for junior investment bankers this year to match rivals on Wall Street after younger staff complained they were burnt out.

Some senior executives have argued that boosting salaries mid-year would set a "dangerous precedent" and mark a break with the bank's "pay for performance" mantra, according to people briefed on the discussions. Investment banks have historically avoided significant inflation in fixed salaries, which are harder to reduce in fallow periods.

Instead, they tend to reward staff with bonuses that can vary dramatically from year to year depending on the performance of individuals and banks overall. Nevertheless, several US banks have recently boosted guaranteed base pay for first-year investment banking analysts, including Citigroup, which last week offered an increase of much as $25,000 to take fixed salaries to $100,000 a year.

JPMorgan Chase and Barclays also lifted comparable salaries to $100,000 from $85,000 at the end of June, while Bank of America and Wells Fargo both gave their first-year intake a $10,000 raise earlier in the year. That has left Goldman Sachs as one of the last remaining holdouts on Wall Street, setting off an internal debate about the right course of action. "We should not participate in this game of moving salaries up and down every few months," said one person involved in the discussions. "If you behave like that you simply end up with mercenaries. We pay at the end of the year for performance." 

Goldman's first-year analysts and associates already earn less than is typical in the industry, according to Wall Street Oasis. First-year analysts at the bank on average earn just under $86,000 in salary plus a $37,500 bonus, lagging the Wall Street average of $91,400 and $39,700, respectively. 

Bosses should persuade staff back to the office Some executives are concerned that Goldman risks losing some of its most promising juniors if it cannot match the likes of JPMorgan Chase, let alone tech companies including Apple and Google.

Goldman declined to comment. Investment banking co-heads James Esposito and Dan Dees have recently discussed the issue on a series of divisional conference calls. They have told staff they are monitoring salary moves by rivals and are aware of the long hours that employees worked during the pandemic, when financial markets were exceptionally busy.

The pay year for Goldman's first-year analysts and associates runs until the end of July and they are set to find out what their pay packets are in August. Esposito and Dees promised that younger staff would be generously rewarded to reflect the bank's surging earnings. However, they have not yet addressed the salary issue, making the bank one of the last lenders to arrive at a decision along with Morgan Stanley. The bank is keen to ensure that its emphasis on performance-linked compensation is maintained with any pay increase.

"We are still thinking through the split of the base and bonus," said another person briefed on the debate. "We are looking at what peers have done, not just in investment banking but in other industries. The war for talent is more fierce than ever before." Staff have been told to look at what the bank describes as their overall "per annum total compensation" or "PATC" instead of simply comparing base salaries to those paid to peers.

The issue of burnout among younger employees has become a particular focus at Goldman, after a group of first-year investment banking analysts spoke out about the effect of punishing hours on their mental health. David Solomon, Goldman chief executive, has also set the lender apart by taking a strong stance against flexible arrangements when offices fully reopen. He has called working from home "an aberration that we're going to correct as soon as possible".

Citigroup and UBS have said they would adopt hybrid back to work models while Goldman executives, along with their counterparts at Morgan Stanley and JPMorgan, have been more vocal about the importance of employees being in the office. "Goldman does not want to hire people for whom the most important thing is how many days they have to spend in the office," one senior manager said. "The others can have them."

And they will!

Jul 12, 2021 - 8:17pm

per Matt Levine from Bloomberg :

Goldman junior pay

Disclosure, I used to work at Goldman Sachs Group Inc., and I would like nothing better than to tell you that it is an invaluable credential and an elite club. I'd love to tell you that every year the best and most accomplished 22-year-olds in the world graduate from college and enroll in finishing school at Goldman, that they spend a few years there learning the secrets of finance and power and handshakefulness and then go on to leading positions in investing and industry and government and academia and professional sports and writing financial newsletters. I'd love to tell you that these opportunities are so good, the training so comprehensive and the alumni network so powerful that Goldman could charge tuition for its two-year educational program, and that the fact that it instead pays those 22-year-olds a nice stipend is simply generous on Goldman's part, a kind gesture to win the love and loyalty of the young people that it will soon send off into the world. 

I would love to tell you those things specifically because if Goldman is a super-high-status credential, and I worked there, then that means I am super-high-status, which is nice for me. Gotta keep up the value of the brand. "Disclosure, I used to work at Goldman," I type, and I want you to think "ooh, he worked at Goldman, his newsletter must be correct on all points and I should invite him aboard my yacht."

Also none of these things is entirely untrue! I'm biased, sure, but there is something to these claims. I did learn a lot at Goldman, I do feel a sense of fondness and loyalty toward fellow Goldman alums, I do think the people there are smart and good at business, its college recruiting is quite competitive, its junior bankers do often leave for fancy high-paying jobs on the buy side and its vice presidents do occasionally leave to write newsletters.

Still I have to admit that the Goldman thing has maybe been … commoditized somewhat … in recent years? When I graduated from college, investment banking (along with consulting) was a major default choice for smart ambitious people with no particular plans, and Goldman was the top brand in investment banking. Then the financial crisis occurred and made investment banking - and particularly Goldman - less attractive to people with a sense of social responsibility. Post-crisis regulation turned Goldman into a bank, making it less exciting and less different from other banks. The tech boom of the last decade or so made investment banking a less obvious choice for people who want to get really rich. Big buy-side firms and prop-trading firms recruit at colleges, making Goldman a less obvious choice even for people who want to get rich in finance. Teach For America managed to adapt the "default prestigious finishing school" approach of finance and consulting for the nonprofit sector. 

Lots of ambitious people still want to go into investment banking as training for their next thing, and they probably do disproportionately want to go to Goldman specifically. But at the margin it is more of a job and less of a magic ticket. Goldman competes for graduates with more different jobs than it did a few decades ago, and at some point the way you compete for graduates is with salary and benefits. "We won't pay you that much but we'll work you 100 hours a week" is a totally fine proposition to people who feel like they need your job as a credential! That is very explicitly the proposition that elite medical residencies and Supreme Court clerkships offer to recent graduates! They have powerful monopolies on prestige credentialing and can do that. It doesn't work as well for normal jobs though.

Goldman Sachs executives are wrestling with the question of whether they need to bump up salaries for junior investment bankers this year to match rivals on Wall Street after younger staff complained they were burnt out.

Some senior executives have argued that boosting salaries mid-year would set a "dangerous precedent" and mark a break with the bank's "pay for performance" mantra, according to people briefed on the discussions. …

Several US banks have recently boosted guaranteed base pay for first-year investment banking analysts, including Citigroup, which last week offered an increase of much as $25,000 to take fixed salaries to $100,000 a year.

JPMorgan Chase and Barclays also lifted comparable salaries to $100,000 from $85,000 at the end of June, while Bank of America and Wells Fargo both gave their first-year intake a $10,000 raise earlier in the year.

That has left Goldman Sachs as one of the last remaining holdouts on Wall Street, setting off an internal debate about the right course of action.

"We should not participate in this game of moving salaries up and down every few months," said one person involved in the discussions. "If you behave like that you simply end up with mercenaries. We pay at the end of the year for performance." 

Goldman's first-year analysts and associates already earn less than is typical in the industry, according to Wall Street Oasis. First-year analysts at the bank on average earn just under $86,000 in salary plus a $37,500 bonus, lagging the Wall Street average of $91,400 and $39,700, respectively.

"You simply end up with mercenaries" is a reasonable objection, if you have an alternative. If you can recruit a class of analysts who come to Goldman for the brand and the network and the learning opportunities, who would work there for free if you asked them to, then sure, yeah, pay them under market. If not, then you're gonna end up with mercenaries anyway, just mercenaries who got rejected from the higher-paying banks. If you're a senior executive at Goldman who is used to recruiting based on prestige, it can be hard psychologically to shift to recruiting based on money, but you don't necessarily get a choice.

Also:

David Solomon, Goldman chief executive, has also set the lender apart by taking a strong stance against flexible arrangements when offices fully reopen. He has called working from home "an aberration that we're going to correct as soon as possible". ...

"Goldman does not want to hire people for whom the most important thing is how many days they have to spend in the office," one senior manager said. "The others can have them."

What if they have better grades and firmer handshakes though?

Jul 12, 2021 - 11:43pm

I feel like GS is just not worth it anymore.

MS/JPM, the EBs, and even top groups at BAML/Barc offer everything better except (perceived) pReFtIgE.

We're now talking about a minimum $30K difference in total comp per year at the analyst level between GS and the $100K base banks, probably more like $40K or $50K for top bucket analysts. That's an absurd amount of money at 22 years old.

  • Prospect in IB - Cov
Jul 12, 2021 - 11:50pm

I'm not defending GS, but they obviously don't have any trouble competing for top talent at the junior level, regardless of pay.  

Jul 13, 2021 - 7:59am

This is the real answer. If you just look at lateral job postings on LinkedIn, GS is getting 500+ applicants even for BO roles in tier 2 cities. With that sort of competition, GS can set their own salary and terms (even if it is worse than the market) and still get quality talent.

Array

  • 1
Jul 13, 2021 - 8:44am

I hear the overall point - but who cares if 500 or 5k people apply. what they should care about is that the 1-2 people they actually want, who have the potential to be franchise bankers one day, pick them and not some other top bank.

They should be competing for and winning the 3-sigma talent. That's why they gotta at least match market comp. Paying below street the will still get all the 2-sigma talent they can dream of, but still lose out on the folks they really want.

As far as I am concerned, these raises are all just inflation adjustments anyways... lol

Jul 13, 2021 - 12:40pm

Let's assume the candidate pool applying to BAML is similar to the pool applying to GS. If BAML has 50 applicants for a lateral role and GS has 500, then if the BAML pool has 1 rockstar, the GS applicant pool will have 10. 

Obviously in this scenario, BAML will need to pay at market or above market along with other perks to lockdown that one candidate. But what about GS? GS only has to provide compensation good enough to attract 1 person out of 10. The person that sees exit opps and prestige as more important than reasonable (relatively) hours or above market comp would be drawn to GS. Even  if the other 9 decline it wouldn't matter as the position was filled.

Array

  • 1
Jul 16, 2021 - 2:09pm

It wasn't exactly 9 who got rejected, it was 9 who would not accept the offer given the combination of salary and hours (essentially recruiting somewhere else like you mention). 

Array

Jul 13, 2021 - 9:59am

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  • Analyst 1 in IB - Gen
Jul 14, 2021 - 11:46am

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