Goldman Sachs Has Considered Moving Up Bonus Payouts
In a break from recent practice, Goldman Sachs has considered paying out 2010 compensation before the end of the year, rather than early next year, according to people familiar with the matter.
That move, if Goldman were to make it, would be one way to combat the uncertainty hanging over income tax rates in 2011 and beyond by allowing employees to take advantage of the current tax rates. But an early payout could also be perceived by critics of the firm as a way to enrich Goldman employees by gaming the system.
A Goldman spokesman declined to comment on the firm’s compensation plans.
Historically, say people close to the firm, Goldman at times paid out year-end bonuses before December 31, partly in order to help employees take advantage of more favorable tax rates.
But doing so became more difficult, these people say, when Goldman switched from a November 30 fiscal year to a December 31 one. Now, in order to pay employees early, the firm would have to estimate its year-end returns and award compensation based on those guesses, rather than waiting for the hard data.
With election dayjust a few days away and broad uncertainty about whether members of Congress will vote to extend the current tax rates before the end of the year, some workers on Wall Street are concerned about big tax hikes.
If Congress fails to act and the Bush-era tax cuts expire at year end, top earners—many of whom work in the financial sector—will have to part with 39.6 percent of their income, a significant rise from the current level of 35 percent.
If Goldman ultimately decides to compensate workers early, it is unclear whether it will be joined by other firms.
Spokespeople for Morgan Stanley and Bank of America and an official at J.P. Morgan said their companies are not currently considering early payouts. A spokesman for Citigroup did not respond to requests for comment.
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