Dividing Up the Spoils

The partners of the prestigious Wall Street firm Goldman, Sachs & Co. work long, hard hours, provide a useful economic function and give generously to charities. They also make a breathtaking amount of money: $2.7 billion in pretax income last year, a number that nearly matched the 1992 gross national product of Uganda.

Goldman earned its megaprofits on just $13.2 billion in revenues, which brought a very handsome 20.14% return -- head and shoulders higher than margins for most financial institutions. Yet they are not alone in this stratosphere. Rivals J.P. Morgan and Merrill Lynch turned in comparable performances.

Unlike employees at huge corporations that must share profits with stockholders, Goldman's partners get to keep the money. Last year 161 partners cut the cake. One senior partner is said to have been served an especially big slice: about $30 million. Since Goldman is a private partnership, it is not required to make public its finances. Nonetheless, the telltale numbers from a Goldman prospectus made their way into Investment Dealers' Digest. Other bits of evidence occasionally fall into the public domain. When Goldman co-chairman Robert Rubin quit to work as a presidential adviser, his disclosure statement reported a 1992 income from Goldman of $26.5 million.

The partners are more than willing to distribute crumbs from their cake. In 1993 everyone on Goldman's staff of 8,000 received a year-end bonus equal to 30% of salary, plus a piece of the firm's $17 million contribution to the employee profit-sharing plan. Moreover, the firm rules say that most of the profits must be reinvested and except in certain dire emergencies cannot be withdrawn until a partner leaves. Even senior partners who make upwards of $20 million draw salaries of well under $300,000. No need to feel too sorry for them though; they can also draw down the interest they earn on reinvested capital, which for a veteran banker can easily amount to millions.