Goldman Blinks on Cash Bonuses to Top Execs

By Staff Report

Dec. 11, 2009

Days after British authorities unfurled a 50 percent tax on most banker bonuses and French and German officials threatened to follow suit, Goldman Sachs tried to defuse rising public anger over big Wall Street payouts by saying its top 30 executives wouldn’t receive cash bonuses this year.

But since the move leaves Goldman ample room to shower its remaining 31,000 employees with an estimated $20 billion in bonus cash, it’s unclear whether the announcement will succeed in defusing tensions surrounding Wall Street pay in general and Goldman in particular.

The moves, however, figure to be widely imitated throughout Wall Street, where Goldman is the undisputed leader in pay—and profits.

Instead of awarding cash, Goldman said bonuses to the Top 30 would be made in the form of shares that can’t be sold for five years. Yet since shares have long since constituted the lion’s share of bonus pay for the higher-ups at Goldman, this change is less dramatic than it might initially seem.

Goldman also took a step toward addressing the problem that bankers don’t suffer financially for mistakes that become apparent only long after a deal or trade is struck.

The firm created what it called an “enhanced recapture provision” that would allow it to claw back previously granted compensation if it’s determined that the pay was based on “materially improper risk analysis” or if the employee “failed sufficiently to raise concern about risks.”

Goldman also said it would allow shareholders to vote on whether they approve of the company’s compensation practices. While such a move may sound like a significant concession, the vote in fact would be nonbinding.

None of Goldman’s five highest-paid employees received cash bonuses last year. In 2007, chief executive Lloyd Blankfein and co-presidents Gary Cohn and Jon Winkelried each reached about $27 million in cash bonuses. Generous as those payouts were, they were a minority of their total compensation of more than $70 million each.

Filed by Aaron Elstein of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail

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