Bonus Watch: Andrew Ross Sorkin Hates Your Bonus

We're not sure how we overlooked this until now. On Sunday, Andrew Ross Sorkin, DealBook editor for the New York Times, penned an essay complaining that bonuses at Goldman Sachs were too high. Since we're on record as defending Goldman bonuses, it only seems fair to bring you the other side of the argument.

...Goldman’s pay seems completely out of whack with its peers’.

Goldman’s compensation per employee, as mentioned earlier, is about $623,418. That’s nearly double what the average employee at rival firms earns. Lehman spent the equivalent of about $314,000 for every employee, and Bear Stearns spent about $320,000.

You could argue that Goldman Sachs makes its money more efficiently, and it does. You could argue that Goldman Sachs is in a different business than its rivals, and in some sense, it is: its biggest profits come from trading, not from investment banking.

But are its employees so much more talented than the rest of Wall Street that they deserve a “Goldman premium” of such huge proportions? That’s a tough case to make.

Well, yes. That might be true. But the opposite is also true.

Presumably Sorkin thinks some of the money being paid out in bonuses should go to shareholder equity. But we could ask the same question: are Goldman shareholders so much more talented investors than the rest of the investment community that they deserve a "Goldman premium" of such huge proportions. That's a tough case to make.

Trying to find an objective measure of how much talent is worth is a kind of silly question. The reason why both are tough cases to make is that they aren't possible to make. They ask us to point where on the big score board in the sky it says Goldman Sachs executives deserve so much money. But the big score board in the sky isn't visible from down here, where we have to guide ourselves by market forces and the decisions of individual firms and investors.

Goldman’s Season to Reward and Shock [New York Times]