What does ‘capture by employees’ mean in 𝑻𝒉𝒆 𝑬𝒄𝒐𝒏𝒐𝒎𝒊𝒔𝒕 in the context of being a ‘vice’ of speculative activity in investment banking?

Question

What is ‘capture by employees’?

In this past week’s January 26th issue of The Economist, the phrase capture by employees appears in a leading article* titled “The Humbling of Goldman Sachs” in this surrounding context:

Goldman’s struggles point to several lessons. One is that it still excels, but in a bad industry. Investment banking combines the drawbacks of a regulated activity (capital requirements and red tape) with the vices of a speculative one (volatility and capture by employees). The firm says it has become more disciplined on pay but last year forked out $15bn, its second-highest salary and bonus bill since the financial crisis, even as profits halved to $11bn and the firm barely beat its cost of capital. The real action in finance is outside regulated banking, where a new cohort of stars rules, including Blackstone in private markets, BlackRock in index funds, and Citadel, an investing and trading house that made its clients $16bn in 2022.

Is capture by employees something held by employees but not in favor of the employer?

Or does it mean that the employee took a cut from a deal?

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^Footnotes

• A leading article or leader is the British English equivalent of an editorial or opinion column in North America. The paywalled OED glosses it as

  One of the longer large-type articles in a newspaper, appearing as the expression of editorial opinion on any subject; a leader.

Answer 1

This research article: Do managers capture the value they create? states

We investigate the relationship between value creation and value capture among frontline managers. Using longitudinal data from a restaurant chain, we find that those managers who persistently create more value for the firm capture just 0.5% of that extra value through their pay.

This indicates that 'value capture' is the amount of value generated that is taken up by additional running costs, and so isn't available to the speculators.

Answer 2

By capture by employee they mean how much employee retain in the value they create in financial transaction both in fixed pays and bonuses. Goldman Sacks is known in the financial industry as a high paying company which, in difficult times, is a drawback for the company financial results.

Value Capture is the process of retaining some percentage of the value provided in every Transaction. The more value you capture, the less attractive your offer becomes.

There are two major approaches to Value Capture:

• Maximization. An organization should try to capture as much value as possible.
• Minimization. An organization should capture as little value as possible, as long as it remains Sufficient.

(personalmba.com)