At Goldman, there is such a thing as free lunch…
On Friday morning, when the former executives of two competing firms were preparing to get grilled by Congress over the subprime mess, Wall Street golden child Goldman Sachs (GS) filed its latest proxy. Depending on the source, Goldman’s Lloyd Blankfein made either $54 million {AP} or $67.5 million {WSJ}.
But the part that I found far more interesting was the new disclosures on some of the perks that top executives receive, including what the proxy describes as “in-office meals”. Though the filing provides no other details, we’re pretty sure they’re not talking about tuna on rye from the local deli, or even from the Goldman cafeteria, which just last week was the target of a protest over the low pay Goldman cafeteria workers receive from Aramark (old ticker RMK), which operates the cafeteria and which was taken private by Goldman and others last year.
Another first-time disclosure in Goldman’s filing was the amount the company spends on providing cars and drivers to its five top executives, which the company says are necessary for “security reasons”. Unlike a lot of other companies, Goldman provides the aggregate cost of the service, so it’s hard to figure out what part of the $233K spent to provide Blankfein with a car was for business use vs. personal use. Also interesting was the $1.1 million in “international assignment benefits”, which we’re assuming is mostly housing expenses and airfare, though there’s no other detail, and the corresponding $2.1 million tax gross-up that Edward Forst, the former chief administrative officer who in September was tapped as co-head of investment management, received after moving to London in April.
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March 11th, 2008 at 11:23 am
Well, the answer on Blankfein’s comp is closer to 68 million than 54 million. Advantage: WSJ.
As to the lunches, GS maintains a kitchen on the 30th floor of 85 Broad with mutliple dining rooms to facilitate meals with clients and other business purposes. The 30th floor also is home to the executive suite. So, the top executives can have the kitchen prepare their breakfast and lunches.
Breakfast is often a bowl of fruit. Lunch is often a sandwich. Or it can be more fancy, perhaps an item from the menu being offered that day to visiting clients.
Now, if you are paying the CEO 68 million per year, that works out to about 272,000 per day (bassed on 250 working days per year), or 22,667 per hour based on a 12 hour day.
What’s the alternative? The CEO could spend time each day to ride the elevator downstairs to the lobby, then ride the escalator down to the cafeteria in the basement, order food, wait for food to be prepared, stand in line to pay cashier, then repeat the return trek to his desk on the 30th floor.
Let’s budget 10 minutes per day for that round trip. That’s 2,500 minutes per year, or more than 41 hours, or 3.5 working days per year.
Now, the proxy indicates that Blankfein received $384,157 in other compensation, including $233,053 for car and driver, and $61,246 for financial and benefits counseling. Adding together all the items shown in footnote (e) results in a sum of $381,191, leaving a difference of $2,966 which we can infer is the amount allocated for the in-office meals. That seems like a completely reasonable expense comapred to the opportunity cost of the CEO’s time treking to and from the the basement cafeteria.
The same math for the CFO Mr. Viniar show about $5,243 left to allocated to meals. But we want the CFO at his desk. When’s he there, he does things like this:
Late last year, as the markets roared along, David A. Viniar, Goldman’s chief financial officer, called a “mortgage risk†meeting in his meticulous 30th-floor office in Lower Manhattan.
At that point, the holdings of Goldman’s mortgage desk were down somewhat, but the notoriously nervous Mr. Viniar was worried about bigger problems. After reviewing the full portfolio with other executives, his message was clear: the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said.
http://www.nytimes.com/2007/11/19/business/19goldman.html?_r=1&em&ex=1195621200&en=a3db4f1df6a297ef&ei=5087%0A&oref=slogin
March 11th, 2008 at 4:54 pm
The response by “interested” is accurate and well valued from a financial perspective, but unfortunately biased toward one side.
- EXAMPLE -
Assuming 30 minutes of bathroom breaks per day (5 #1, 1 #2, depending on Blankfein’s regularity) that’s $11k in wasted productivity per day, or $2.5M per year. Why do you not recommend a $100k/year allowance for adult diapers?
The same amount of time is probably spent showering. Perhaps a $100k executive locker room staffed by firehose personnel to “hose down” the executive team is in order?
-Rob
March 11th, 2008 at 5:20 pm
how much does it cost the company when he takes a leak? Has anyone done the math? He should be put on a catheter!
March 12th, 2008 at 8:24 am
Providing meals for only a portion of the firm’s staff is illegal, so GS duly reports (per the proxy) “the incremental cost [as part] of….the “All Other Compensation†column above.”
Did the recipients pay taxes on that compensation?
March 12th, 2008 at 9:10 am
Lots of interesting (and funny!) thoughts here. I guess the main point I was trying to make is that this was a new disclosure and as footnoted regulars know, those are often the most interesting.
The actual amount, which Interested calculates as $2,966 based on subtracting everything else, is almost insignificant. Are we really supposed to believe that Goldman wasn’t providing this benefit before to Blankfein and the other NEOs? And if so, why not simply disclose it?
March 12th, 2008 at 5:56 pm
Ken Houghton Says:
March 12th, 2008 at 8:24 am
“Providing meals for only a portion of the firm’s staff is illegal”i
I’d be interested in a citation in law showing where it is illegal for a company to provide meals to some and not all of its employees.
March 13th, 2008 at 8:31 pm
Surely, there must be more important footnotes to report on and to respond directly to.
March 13th, 2008 at 9:07 pm
No doubt there’s more important footnotes out there. But like it or not, it’s footnotes like these that tend to draw the most attention — and, yes, reader comments.