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Goldman Sachs is getting a new leader and venturing into different businesses, but there is a number in the bank’s second-quarter earnings that may also send a signal about its future.
The number in question is Goldman Sachs’s compensation ratio, or the percentage of the bank’s revenue it spends on pay and benefits. Goldman Sachs set aside 37 percent of its revenue for compensation in the second quarter. That was well below the 41 percent for the same period last year and marked the biggest drop in years.
Compensation is central to Wall Street. A bank’s top earners expect bigger bonuses as they bring in more revenue. As a result, compensation ratios don’t change much from year to year. That’s good for the bankers and traders, but not so good for shareholders, who generally prefer companies to restrain costs so profits rise faster than revenue.
