By Colin Barr
July 20, 2010

Even at Goldman Sachs, the bonus pool no longer looks bottomless.

Wall Street’s most gilded firm reported a big drop in second-quarter earnings Tuesday. The trading frenzy that fueled Goldman’s profit rebound last year slowed sharply in the quarter ended last month, as investors stepped back from a turbulent market.

But Goldman’s bottom line isn’t the only number that took a hit. Goldman’s bonus pool shrank as well — though it’s worth noting that the decline will hardly leave any of the firm’s 34,000-odd workers hard up.

Goldman (GS) set aside $9.3 billion to pay salaries, benefits and year-end bonuses in the first half of 2010. That’s down 18% from a year ago and means the average worker would take home $272,581 in pay and perks for the first six months of the year.

The compensation drop compares with a 22% decline in first-half profits, prompting some skeptics to question whether the bank is actually paying for performance as it often claims.

The bank stresses that the accrual number doesn’t actually dictate what workers will receive. The company makes those decisions at year-end, financial chief David Viniar said on a call with reporters Tuesday morning, based on performance, the competitive environment and what he coyly called “other external factors.”

The role of factors such as political pressure and public relations were evident late last year, as critics homed in on Goldman’s soaring profits and outsize paychecks at a time of high unemployment and record foreclosures.

Goldman, after years of paying out nearly half its revenue to workers, slashed their allocation at the end of 2009, steering clear of another round of bonus pool scandal. The move cut employees’ share of revenue to 36% and kept the average check below $500,000. At midyear it looked headed for a much higher number.

Any decision to pay less to employees means more for shareholders, as compensation expense is the firm’s biggest cost and reductions fall straight to the bottom line. But the outlook for Goldman shareholders is decidedly mixed.

Goldman has since restored part of the bonus pool – the first-half payout ratio is 43%. What’s more, everyone expects Wall Street’s profits to be depressed for a while as investors remain fearful and new regulations shut down some money makers.

No wonder the stock is down 10% since bonus rage peaked last summer.

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