Goldman Sachs: paying through the nose The investment adage that you're better off working for a bank than owning shares in one is mostly true. Indices of global banks, including sexy developing-world lenders, have gone exactly nowhere over the past decade. Ditto the stock price of the mighty Goldman Sachs, which released full-year results on Wednesday. Over shorter periods, bank returns are uglier still. Yet Goldman, for example, has paid its employees $125bn during the past 10 years (doubling along the way), twice what it made in net profits. Hence, some hope that a possible route to boosting low bank returns on equity is a structural cut to industry compensation ratios. At Goldman, again, lowering 2012"s full-year wage bill by a third would have increased its ROE from 7 to 12 per cent, all other things being equal. But is that realistic? Bankers, of course, talk about the war for talent and the potentially devastating effect on morale and top-line growth if compensation and/or headcount are slashed. It is true that most bankers have next to no loyalty, especially the really well-paid ones, who, to be fair, mostly earn their keep. What is more, flush shadow banking institutions, such as hedge funds, are also constantly circling. The reality, however, is that banks also support a thick layer of second tier executives, as well as legions of pen-pushing, meeting-loving, middle- and back-office workers who are paid multiples of their worth and contribution, especially compared with other industries. And market dynamics matter. If the whole financial sector started paying less, the bargaining power would fall for even star employees. Perhaps such a change is happening. Goldman reduced its compensation bill by a fifth in 2012, and global headcount by 2,300. Yet those remaining are hardly queueing for the exits, nor will the thousands of graduates who apply every year think twice.