Goldman Sachs 2015 Annual Report Download - page 70

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Operating Expenses
Our operating expenses are primarily influenced by
compensation, headcount and levels of business activity.
Compensation and benefits includes salaries, discretionary
compensation, amortization of equity awards and other
items such as benefits. Discretionary compensation is
significantly impacted by, among other factors, the level of
net revenues, overall financial performance, prevailing
labor markets, business mix, the structure of our share-
based compensation programs and the external
environment. In addition, see “Use of Estimates” for
additional information about expenses that may arise from
litigation and regulatory proceedings.
The table below presents our operating expenses and total
staff (which includes employees, consultants and temporary
staff).
Year Ended December
$ in millions 2015 2014 2013
Compensation and benefits $12,678 $12,691 $12,613
Brokerage, clearing, exchange and
distribution fees 2,576 2,501 2,341
Market development 557 549 541
Communications and technology 806 779 776
Depreciation and amortization 991 1,337 1,322
Occupancy 772 827 839
Professional fees 963 902 930
Insurance reserves 1—— 176
Other expenses 25,699 2,585 2,931
Total non-compensation expenses 12,364 9,480 9,856
Total operating expenses $25,042 $22,171 $22,469
Total staff at period-end 36,800 34,000 32,900
1. Consists of changes in reserves related to our Americas reinsurance
business, including interest credited to policyholder account balances, and
expenses related to property catastrophe reinsurance claims. In April 2013,
we completed the sale of a majority stake in our Americas reinsurance
business and no longer consolidate this business.
2. Includes provisions of $3.37 billion recorded during 2015 for the agreement
in principle with the RMBS Working Group. See Note 27 to the consolidated
financial statements for further information about this agreement in principle.
2015 versus 2014. Operating expenses on the consolidated
statements of earnings were $25.04 billion for 2015, 13%
higher than 2014. Compensation and benefits expenses on
the consolidated statements of earnings were $12.68 billion
for 2015, essentially unchanged compared with 2014. The
ratio of compensation and benefits to net revenues for 2015
was 37.5% compared with 36.8% for 2014. Total staff
increased 8% during 2015, primarily due to activity levels
in certain businesses and continued investment in
regulatory compliance.
Non-compensation expenses on the consolidated
statements of earnings were $12.36 billion for 2015, 30%
higher than 2014, due to significantly higher net provisions
for mortgage-related litigation and regulatory matters,
which are included in other expenses. This increase was
partially offset by lower depreciation and amortization
expenses, primarily reflecting lower impairment charges
related to consolidated investments, and a reduction in
expenses related to the sale of Metro in the fourth quarter
of 2014. Net provisions for litigation and regulatory
proceedings for 2015 were $4.01 billion compared with
$754 million for 2014 (both primarily comprised of net
provisions for mortgage-related matters). 2015 included a
$148 million charitable contribution to Goldman Sachs
Gives, our donor-advised fund. Compensation was reduced
to fund this charitable contribution to Goldman Sachs
Gives. The firm asks its participating managing directors to
make recommendations regarding potential charitable
recipients for this contribution.
2014 versus 2013. Operating expenses on the consolidated
statements of earnings were $22.17 billion for 2014,
essentially unchanged compared with 2013. Compensation
and benefits expenses on the consolidated statements of
earnings were $12.69 billion for 2014, essentially
unchanged compared with 2013. The ratio of
compensation and benefits to net revenues for 2014 was
36.8% compared with 36.9% for 2013. Total staff
increased 3% during 2014.
Non-compensation expenses on the consolidated
statements of earnings were $9.48 billion for 2014, 4%
lower than 2013. The decrease compared with 2013
included a decrease in other expenses, due to lower net
provisions for litigation and regulatory proceedings and
lower operating expenses related to consolidated
investments, as well as a decline in insurance reserves,
reflecting the sale of our Americas reinsurance business in
2013. These decreases were partially offset by an increase in
brokerage, clearing, exchange and distribution fees. Net
provisions for litigation and regulatory proceedings for
2014 were $754 million compared with $962 million for
2013 (both primarily comprised of net provisions for
mortgage-related matters). 2014 included a charitable
contribution of $137 million to Goldman Sachs Gives, our
donor-advised fund. Compensation was reduced to fund
this charitable contribution to Goldman Sachs Gives. The
firm asks its participating managing directors to make
recommendations regarding potential charitable recipients
for this contribution.
58 Goldman Sachs 2015 Form 10-K