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Goldman Sachs Takes Long View Over Payouts

Justin Baer |Financial Times
Friday, 24 Dec 2010 | 7:15 AM ET

Goldman Sachs adopted a provision in its executive compensation scheme that will reward top officers based on their ability to meet long-term performance goals without encouraging “imprudent risk-taking”.

The Goldman Sachs booth on the floor of the New York Stock Exchange
Getty Images
The Goldman Sachs booth on the floor of the New York Stock Exchange

Goldman’s board approved the so-called long-term performance incentive plan on December 17 as Wall Street prepared for another season of multimillion-dollar bonuses and a possible fresh wave of condemnation of its pay practices.

The change comes amid expectations that regulators will soon impose guidelines that tie a larger portion of bank executive pay to corporate performance and risk management.

Activist investors have encouraged many large companies to adopt similar incentive plans, arguing that the schemes offer shareholders a more transparent view of executive pay.

Goldman’s policies grant it the ability to defer some employees’ pay and “claw back” awards. But the new plan would disclose specific goals its participants would have to meet.

In a filing with the Securities and Exchange Commission, Goldman said on Thursday that the performance-based awards “may be granted from time to time to key employees”.

The bank did not say if it would use the new program as part of this year’s pay plans, and which officers would be eligible for it.

“The long-term incentive plan is a tool the compensation committee may use to further align incentive compensation with long-term performance in a manner that does not encourage imprudent risk-taking,” a Goldman spokesman said.

In its filing, the bank said its chief risk officer would review the key terms of any awards.

Wall Street’s decisions to pay multimillion-dollar awards not long after the financial crisis prompted a backlash. Goldman paid its chief executive, Lloyd Blankfein, a $9 million stock bonus for the bank’s 2009 performance. Two years earlier, Mr Blankfein received $68 million in cash, stock and options.

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