US investment giant Goldman Sachs said on Thursday it would pay bonuses to top executives in stock instead of cash this year under a policy adopted amid a growing furor over banker pay.
The firm’s 30-member management committee will receive bonuses in the form of shares that cannot be sold for five years and which can be recovered under a “clawback” provision, Goldman Sachs said in a statement.
The shares can be recovered “in cases where the employee engaged in materially improper risk analysis or failed sufficiently to raise concerns about risks,” the powerful Wall Street firm said.
The move “is intended to ensure that our employees are accountable for the future impact of their decisions, to reinforce the importance of risk controls to the firm and to make clear that our compensation practices do not reward taking excessive risk,” Goldman Sachs said.
Goldman Sachs announced the change to its compensation policy was approved by its board of directors, and would be submitted to shareholders for an advisory vote next year.
The action comes amid a public outcry in the US and elsewhere over bonuses and perks for executives at banks, viewed by many as responsible for the global financial crisis.
Goldman, among the most successful financial firms throughout the crisis, has been a flashpoint for criticism even though it has repaid a government capital injection.
“We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm’s performance and incentivizes behavior that is in the public’s and our shareholders’ best interests,” said Lloyd Blankfein, chairman and chief executive. “In addition, by subjecting our compensation principles and executive compensation to a shareholder advisory vote, we are further strengthening our dialogue with shareholders on the important issue of compensation.”
Douglas McIntyre at Web site 24/7WallSt.com said Goldman Sachs “succumbed to the extraordinary outcry against the size of bonuses at the firm, some of which will certainly range into the tens of millions of dollars.”
Last year, Blankfein and six top Goldman executives renounced their bonuses, amid fears of a backlash in view of a deepening financial crisis. Many other banks followed suit.
In 2007, despite a looming mortgage crisis, Blankfein received a Wall Street record-setting US$68 million bonus payment on top of his annual salary of US$600,000.
The action by Goldman Sachs came as Britain and France urged world leaders to impose a tax on bankers’ bonuses and consider a tax on financial transactions.
Britain has proposed slapping a one-time 50 percent tax on bonuses above £25,000 (US$40,700) to recoup cash spent saving the financial sector during the crisis. A French government source said a similar measure was being studied.
In the US, a so-called pay czar appointed by the government is reviewing compensation at bailed-out firms and in most cases is restricting salaries to US$500,000 a year at companies receiving exceptional aid.
The Federal Reserve meanwhile last month gathered top bankers to discuss its proposal to limit incentive pay and bonuses to promote financial stability.
The Fed’s proposed rules, subject to comment, stop short of specific pay caps or dollar targets for bonuses or commissions, but instead offer guidance for compliance with the rules.
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