Are higher salaries a risk to the economy?

January 20, 2022, 11:33 AM UTC

Good morning,

The stakes are high for Goldman Sachs when it comes to the war for talent amid inflation.

“On compensation, our philosophy remains to pay for performance, and we are committed to rewarding top talent in a competitive labor environment,” the investment bank’s CFO Denis Coleman said on Tuesday’s earnings call.

Goldman released its Q4 2021 earnings report, which stated net revenues were $12.64 billion for the quarter. That’s about 8% higher than the same time last year. However, profits fell by 13% from a year earlier to $3.94 billion or $10.81 a share. This happened as dealmaking remained strong but compensation rose.

In 2021, compensation costs at Goldman increased 33% to $17.7 billion. For Q4 alone, operating expenses were $7.27 billion, 23% higher than the fourth quarter of 2020 and 10% higher than the third quarter of 2021, the firm said in the report. The increase compared with 2020 primarily reflected “significantly higher compensation and benefits expenses,” Goldman noted.  

Quarterly non-compensation expenses of $4 billion rose year over year, with almost two-thirds driven by technology spend, higher professional fees, and market development related costs, Coleman said. He started his tenure as CFO on Jan. 1, previously co-head of the Global Financing Group in the Investment Banking Division since 2018. He began at Goldman in 1996 as an analyst. 

Taking a look at another large company, Bank of America (BofA) spent about $36 billion on compensation last year, up by about 10%. CEO Brian Moynihan told CNBC in May that the company wants the best talent and “we’re willing to pay what it takes to get it.” BofA reported Wednesday that profits increased 28% in Q4 of 2021. “We earned a record $32 billion in 2021, with every business line solidly contributing,” Moynihan commented in the report. The investment banking division saw profits increase to $2.68 billion from $1.67 billion. “We ended the year on a strong note,” CFO Alastair Borthwick said in the report. “Revenue rose faster than expenses, producing our second straight quarter of year-over-year positive operating leverage.” Borthwick became CFO at the company in the fourth quarter of 2021. 

Goldman and BofA both face high compensation expenses, and it appears the companies will stay the course in that regard. However, some economists worry that “higher wages could lead to entrenched inflation that goes beyond simply short-term supply-chain issues and pandemic-related problems,” according to a Fortune report.  

I’d love to know what you are seeing at your company—is compensation spending up? By how much? Do you see it continuing?

See you tomorrow.

Sheryl Estrada


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Big deal

Venture Pulse, a quarterly report published by KPMG Private Enterprise, takes a look at VC trends. In each quarter of 2021, global VC investment surpassed the $150 billion mark. In 2020, global VC investment rose from $347 billion across 31,623 deals to a record $671 billion across 38,644 deals in 2021, according to KPMG.

Courtesy of KPMG

Going deeper's recent Pay Equity Pulse Survey: Employer Perspective gauged what steps organizations are taking around fair and transparent pay. About 61% of employers said they have a process to address internal pay equity, and 85% said they know what to pay their employees to stay competitive. Meanwhile, 35% have established a pay philosophy that supports pay transparency. The findings are based on a survey of more than 700 U.S.-based HR professionals.


Brendan Dolan was named CFO at CloudBolt Software. Dolan has over 20 years of experience with high-growth SaaS companies, managing everything from M&A to operations and compliance. Previously, he served as CFO of CloudCheckr, Viventium, and CapitalIQ. He brings both a functional and C-suite perspective to a rapidly growing global company.

Tim Pitoniak was named CFO at Issuer Direct Corporation (NYSE American:ISDR), a communications company, effective Jan. 24. Pitoniak brings more than 20 years of financial experience primarily for public companies. Prior to joining Issuer Direct, Pitoniak most recently served as chief accounting officer of Community Brands, LLC. He previously served as VP of corporate reporting and controller for First Data now Fiserv, a fintech. Pitoniak began his career with firms like Morgan Stanley and Ernst & Young.


"By making it harder for startups to be acquired by U.S. companies, jobs will be lost, our economy will be weakened, and our foreign competitors strengthened."

—TechNet president and CEO Linda Moore on the Federal Trade Commission and the U.S. Department of Justice Antitrust Division's announcement Tuesday that they plan to change their merger framework to crack down on large business deals, reported by Fortune

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