Instead of year-end cash bonuses, Goldman Sachs is awarding its 30 top executives with stock. The stock can’t be cashed for five years. Bloomberg (via BusinessWeek) has the details:
The award will be comprised of so-called shares-at-risk, allowing the firm to take them back if it determines that the executive failed to adequately analyze or raise concern about risks, the New York-based company said in a statement today. The firm also will give shareholders a non-binding vote on compensation.
The policy will apply to the 30 members of Goldman Sachs’s management committee, including Chairman and CEO Lloyd Blankfein, Chief Financial Officer David Viniar and the leaders of the firm’s global and regional divisions. Goldman Sachs has been criticized for setting aside $16.7 billion to pay employees in the first nine months of the year after benefiting from government support last year.
The New York Times has more of the backstory:
Goldman insists that it must pay its employees well to keep them from defecting to rivals. So far this year, it has set aside $16.7 billion to pay its workers this year, a figure that translates into roughly $700,000 a employee. Top producers will earn millions. Mr. Blankfein, who forwent a bonus last year, received a $53.4 million bonus in 2007 — a Wall Street record.
Thursday’s developments underscore Goldman’s quandary as Wall Street enters its annual bonus season and comes a day after the British chancellor of the Exchequer stunned London bankers with news that the government there would levy a windfall tax on bank bonuses.
The shares-at-risk statement is particularly clever, from a PR perspective. The language is ambiguous enough that the bank can choose how to apply it, but the consequences make you think that Goldman Sachs means business. This move also pressures other Wall Street firms to follow suite.
That said, the bankers don’t have to pay taxes on their bonuses quite yet, either. And if only the top 30 executives are getting bonuses in stock, what about GS’s other employees? I bet it’s cash.
If nothing else, the folks at Goldman Sachs are pretty smart.