Theory: Best Companies can pay 10% less than competition

The theory that the best companies can pay 10% less than their competition has an exception to the rule - Goldman Sachs.  Over the last year, many have witnessed the financial crisis firsthand and if you happened to be working on Wall Street a year ago, there is a good chance you might not be working there now.  Bear Stearns, Citigroup, Merrill Lynch, and now most recently Lehman Brothers have all reported quarterly losses within the past few quarters and one of these companies (Bear Stearns) now no longer exists.  While these companies were losing money hand over fist, Goldman was preparing to make money hand over fist.  Their ability to recruit the best and the brightest has paid off substantially, by correctly hedging their balance sheet against the mortgage market correction and its employees will be rewarded accordingly.

At the end of every calendar year, the financial news media frequently enjoys reporting on the inflated salaries of investment bankers, especially when the years are good.  At the end of 2007 the media reports which bonus pool is the largest.  In 2006, Goldman paid out 46% of the bonus pool money from the five largest firms.  For 2007, it was predicted to be close to 53%.  These are just predictions, however if Goldman was able to outperform its competition in a year where almost everyone failed, it is probably considered among the majority the most well regarded investment bank on Wall Street.  Furthermore, they consistently pay out the highest bonuses of its top 4 competitors.  The theory that the best companies can pay 10% less than their competition may be true for a majority of companies, however in the investment banking industry, it surely is false!