Goldman Sachs Group Inc. will distribute 2 million shares to its junior employees, seeking to keep talent from fleeing the fifth-largest U.S. investment bank for jobs at dot-com companies.
Goldman will allot the shares - worth about $200 million at current prices - to 8,000 analysts and associates based on a percentage of last year's pay. A spokesman declined to reveal the percentage, which will be the same for each employee.
The former partnership, whose shares have gained 79% since a May 1999 initial stock sale, is not the only firm to tweak compensation in order to compete with Internet companies for the best and the brightest.
Morgan Stanley Dean Witter & Co. is considering tying part of an employee's pay to returns on its technology investments. Some of these have returned more than 1,000%. Lehman Brothers Holdings Inc. opened a venture capital fund for its vice presidents and managing directors.
Goldman's stock award is intended to "focus on attracting, motivating, and retaining" employees, said Henry Paulson, chairman and chief executive. He also said the company wants to offer new opportunities for "wealth creation."
Investment banking still offers one of the surest paths to wealth. Managing director, the highest rank below division head, frequently pays an incumbent more than $1 million annually. In good years, those working in profitable businesses could make more than $10 million.
Now, though, Internet entrepreneurs have amassed much bigger fortunes in short periods as the value of stock in their companies has soared.
Pierre Omidyar founded the online auction service eBay Inc. in September 1995. Three years later, it went public, he now is worth about $5.8 billion. David Wetherell, the chief executive of Internet investment firm CMGI Inc., also started in 1995 and also is a multibillionaire.
Successes like those are luring senior and junior investment banking employees to Internet businesses. A Goldman spokesman said the firm has a low turnover rate, about 3.5%, and that turnover has not risen among analysts and associates.
Analysts usually join investment banks just after graduating from college. They typically stay two years and either get another job or go to business school.
A few in each class stay for a third year with the possibility of being promoted at the end of that year to associate, the next rank.
- Bloomberg News