Goldman is set to pay huge bonuses, but don’t worry be happy!

Escrito el 16 julio 2009 por Antonio Rivela Rodríguez en Uncategorized

Brendan Quirk has just contributed to our financial blog…. Thanks Brendan!

Goldman is set to pay huge bonuses, but don’t worry be happy.

How ever you may feel about yesterday’s news that, in the second quarter, Goldman Sachs posted record earnings, we should all agree that this is a positive sign for the financial sector and maybe even the economy as a whole. Huge bonus condemnations aside, his is good news.
The company is demonstrating that it can make money in areas other than its historic income makers, like the M&A, by being profitable in areas such as fixed income, commodities, foreign currencies (FICC), and under writing. This shows that the industry can be versatile and flexible. Goldman is not filing for bankruptcy it actually made a profit. Let’s not get too upset about bonuses. The company is required to set up a provision for bonuses based on the rules of accounting and industry standards. We should also bear in mind, that Goldman has fewer employees so there are less people getting a cut of the pie and it makes the bonuses look larger, but this is only an incentive the employees.
Finance executives have performance incentives built into their contracts and thus get paid when they perform well, just like a professional athlete gets paid a bonus when he or she achieves goals. However, this issue also has political dimensions to consider as many believe that these incentives fueled the financial crisis by making executives more concerned about short-term gains than long-term sustainability. This news will certainly give critics something to argue about.
So rather than argue, whether or not you agree with executive compensation, we should not lose sight of the fact that a healthy financial sector is a precondition to a healthy economy, and this is good news for everyone.


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