x Abu Dhabi, UAETuesday 25 July 2017

Buzz builds over Goldman pay

The bank's chief Lloyd Blankfein is expected to get a big pay cheque, but whether or not the figure breaks the record $67.9m of two years ago, there will be widespread criticism.

Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, is expected to get a bonus of more than $40 million for last year.
Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, is expected to get a bonus of more than $40 million for last year.

An announcement on the size of the annual bonus of the chief executive of Goldman Sachs Group is imminent, but whether or not the figure breaks the record US$67.9 million (Dh249.4m) of two years ago, there will be widespread criticism that the bank has been "tone deaf" in its approach to the financial crisis. Efforts to deflect criticism and keep regulators at bay have already prompted Goldman to change its bonus strategy, curbing compensation in the fourth quarter of last year and eliminating cash bonuses for top managers, instead paying them in stock.

But the Wall Street investment bank still may face a storm of criticism when it announces the bonuses of its top executives even as it seeks to trim the headline numbers after a year of record profits. "They have made a number of moves to try to ameliorate the issues," said Alan Johnson, a Wall Street compensation consultant. "I would be shocked if it didn't have an impact on his and everybody else's total."

Mr Johnson estimated that Lloyd Blankfein, Goldman's chief executive, would get a bonus of more than $40m for last year, a period for which Goldman reported record earnings of $13.39 billion. That would fall well below the $67.9m he received in 2007, but would be a considerable improvement on his 2008 bonus, which was nothing. The Times of London reported on Monday that Goldman could pay Mr Blankfein as much as $100m, thumbing its nose at Barack Obama, the US president, and his recently announced intention to clamp down on the banking industry. The newspaper cited bankers who were in Davos, Switzerland, for the World Economic Forum as its sources.

The bank denied the report, calling it "speculative nonsense". "Underneath that cool exterior, it is apparent that there is some very great sensitivity at Goldman about executive compensation these days," said Scott Tangney, a consultant with the New York public relations firm Makovsky. "Because of the government pressure and the public scrutiny, it has already forced Goldman to handle executive compensation in a very different way."

Last month, Goldman sidestepped controversy over its ballooning bonus pool by limiting compensation to three quarters and giving $500m to charity. Before the shift, Goldman was on pace to surpass its record payout of $20bn in 2007. The bonus total for the three quarters was $16.2bn. While political pressure could affect high-profile executives such as Mr Blankfein, it leaves open the possibility of outsize paydays for lesser-known executives and star traders who helped the firm earn a record profit last year.

And rather than setting a different example, business executives in the UK are seeking to emulate their banking peers. This week it was announced that the British retailer Marks & Spencer had agreed a "golden hello" of up to £15m (Dh87.94m) for its new chief executive, Marc Bolland, sparking renewed criticism over its boardroom practices. The clothing, food and home goods retailer said on Monday that Mr Bolland would start on May 1, ending a protracted wrangle with his previous employer, Wm Morrison Supermarkets.

Mr Bolland will get a basic salary of £975,000, an annual bonus of as much as 250 per cent of his salary, and an award of shares under the company's performance share plan which in 2010-2011 will be worth 400 per cent of his salary. M&S will also compensate Mr Bolland for a number of bonuses he forfeited by relinquishing his role as chief executive of Morrison, Britain's fourth-largest grocer. "This is a bad start for the new regime at M&S," said PIRC, a research and consultancy company that advises shareholders on corporate governance issues. "We are opposed to this sort of golden hello. It distorts the market for executives, and compensating directors for the loss of bonuses and incentives at their previous company makes a mockery of the idea that the already high levels of remuneration act to retain key people."

In a separate move, it was announced that Adam Crozier, the former chief executive of the Football Association and the Royal Mail, the postal service, had been hired by ITV, an independent commercial television channel. He could earn up to £16m over the next five years, plus a further £5m to £6m if ITV performs better than its peers. * with agencies @Email:rwright@thenational.ae