is this a proper business model?

From The New York TIMES, just yesterday. I wonder whether this a model that can survive much scrutiny. Read the entire article; it's amazing:

And Goldman Sachs has taken great pains to tell investors that as a percentage of revenue, the compensation costs for its 26,467 full-time employees are actually lower than those of many of its counterparts. This year, the firm spent 43.7 percent of its revenue on compensation and benefits, compared with 46.6 percent last year. That’s lower than Lehman Brothers, for example, which spent 50.1 percent of its revenue this year on compensation. Last year, Merrill Lynch spent about 49 percent of its revenue on compensation; Morgan Stanley, on the other hand, devoted 41.8 percent of its revenue to paying employees.

Using a different yardstick, however, Goldman’s pay seems completely out of whack with its peers’.

Goldman’s compensation per employee, as mentioned earlier, is about $623,418. That’s nearly double what the average employee at rival firms earns. Lehman spent the equivalent of about $314,000 for every employee, and Bear Stearns spent about $320,000.

You could argue that Goldman Sachs makes its money more efficiently, and it does. You could argue that Goldman Sachs is in a different business than its rivals, and in some sense, it is: its biggest profits come from trading, not from investment banking.

But are its employees so much more talented than the rest of Wall Street that they deserve a “Goldman premium” of such huge proportions? That’s a tough case to make.