Goldman Envy Comes to the Legal Profession

Over the weekend, the New York Times had an interesting article about compensation for Wall Street bankers. The article explained how, due to criticism from the public and from Congress, banks shifted employee comp away from cash and towards stocks and options. This shift was supposed to align pay with performance, averting an AIG situation of rewarding failure.

Now, thanks to the recovery in bank shares — fueled in part by generous government bailouts, and not necessarily the brilliant performance of bank employees — these stock and option grants are turning out to be super-lucrative. Here’s an interesting excerpt:

Goldman Sachs, for instance, sharply cut nearly all bonuses it paid last year but gave some executives more options than usual.

The company gave its general counsel, for example, 104,868 stock options and 14,117 shares in December, when the bank’s stock was around $78.

Now the bank’s shares have more than doubled in value, making that stock and option award worth nearly $12 million, according to Equilar, an executive compensation research firm in Redwood Shores, Calif.

Sullivan & Cromwell partners, eat your hearts out. Not only does Goldman GC Gregory Palm get to boss you around, he also makes more money than you do.

Way more. Get a hint of how much, after the jump.

We haven’t dug up Greg Palm’s cash compensation (which we are sure is considerable). But SEC filings show that, between December 2003 and January 2008, Palm sold over $48 million worth of Goldman Sachs stock (almost $49 million, actually — $48,785,016, to be exact).

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Here’s a table of his sales (click to enlarge):

The $48 million in Goldman stock sold by Gregory Palm doesn’t include the $12 million stock and option award for 2009 mentioned in the Times article. If you throw that in, you’re looking at a total of $60 million over seven years (2003 to 2009, inclusive). [FN1]

Biglaw partners do very well for themselves. But how many of them earn over $8 million a year?

Feeling envy for a Goldman guy? Congratulations! Now you know what it feels like to be an investment banker. [FN2]

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[FN1] It should be noted, however, that some of these stock sales may have been connected to stock or options awarded prior to 2003. According to his bio, Palm has been general counsel and head of the legal department since May 1992.

[FN2] Yes, we know — GS is now a commercial bank rather than an investment bank. But you know what we mean.

UPDATE: A commenter suggests that we are UNDERSTATING Palm’s compensation, since even after all his sales he still owns over 800,000 shares of Goldman, worth in excess of $136 million.

If you add $136 million to the $49 million Palm has already cashed in, you get $185 million. Divide that by the 17 or so years Palm has served as general counsel, and you get an average of almost $11 million a year.

Does anyone know of a general counsel who is doing better than Gregory Palm?

UPDATE: Another commenter makes the important point that we haven’t included the exercise price of the options that Palm used to acquire his Goldman shares. So the cost of exercising his options should be backed out of the calculation, thereby reducing his compensation.

The overarching point, though, is that being the general counsel of Goldman Sachs is a very, very lucrative job.

UPDATE: Here is an interesting comment:

GS was a partnership when Greg Palm joined and he therefore was one of the owners of the company when it went public. The stock he has been selling periodically for years came in large part from the conversion of his equity partner stake into sharesof the GS Group when that entity went public in 1999. As often happens, the owners of private companies become fabulously wealthy when a public market to acquire that ownership interest comes into existence.

We have not independently verified its accuracy, but it makes sense to us.

Windfall Seen as Bank Bonuses Are Paid in Stock [New York Times]
Gregory K. Palm: Insider Trading and Stock Options [U.S. Securities and Exchange Commission]