Losers like Bank of America and GM may have to go hat in hand to Ken Feinberg, begging for handsome paychecks for their employees, but luckily for the top echelon at Goldman, which has returned its tainted government fund, they . . . well, apparently they have to go hat in hand to their shareholders, begging for handsome paychecks for their employees.

Wall Street firm Goldman Sachs Group Inc.--known for its outsize profits and unapologetically handsome pay packages to go with them--has begun meeting with major investors in an effort to ward off an investor backlash over its record compensation pool.

The private discussions are a first for Goldman, several shareholders said, as the Wall Street firm finds its self on the defensive over its pay, where employees are on track to earn an average of more than $700,000 apiece this year. The meetings are expected to last several more weeks and come as shareholders are filing proposals aimed at restricting pay at Goldman.

Goldman officials described the meetings, which began in October and have been attended in many cases by President and Chief Operating Officer Gary Cohn or Chief Financial Officer David Viniar, as an effort to explain why its pay levels are reasonable given the company's performance and receive feedback from key stakeholders. Some investors have recently said they now expect Goldman to pay out a smaller percentage of its revenue in 2009 than it did in previous years.

Winning shareholder support for its compensation-and-benefit pool is critical for Goldman executives. While the public uproar over pay has hurt the firm's reputation, shareholders are the actual owners of the firm and the only ones with voting power to change the compensation structure. As a result, Goldman executives have been extremely focused on shareholder feedback.

I'm a little confused as to why Goldman Sachs shareholders would be developing sudden scruples about compensation.  It's not like it just occurred to Goldman this year that every Christmastime they could shower their employees with more money than the average worker sees in a lifetime.  If you hold Goldman stock, you presumably knew this was coming.

Perhaps it's just that they can. Paul Krugman advanced a theory about income inequality that I found unconvincing:  that a major contributor to its growth in the latter 20th century was simply cultural change; people at the top earned more because everyone thought it was okay to earn more.

I still find it pretty unconvincing.  But if shareholders start voluntarily limiting investment banking compensation, to the point where it actually falls materially in aggregate, I may change my mind.

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