The Banking and Strategy Initiative

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Costs blow up – Goldman Sachs accepts Stock comp

Goldman Sachs’ earlier bonus component that averaged $700,000 per employee for this year is likely to be drastically revised. Initial reports suggested a 5 year stock purchase plan but the exact structuring is likely to throw up even more surprises as the government makes agreeing noises to the new compensation plan. France joined Britain in imposing a supertax, but the supertax by itself is unlikely to refund governments that are out of pocket..Immediate target for govt. failures and restructuring Portugal, Italy, Ireland, Greece and Spain. Italy and Ireland are yet to get notice from S&P or Fitch ratings divisions for the country debt/risk downgrade.

Also, the Commercial RE cost is likely to rack up over $225 billion and the US stimulus funds are likely to attempt more foreclosure finance having achieved only 4% till date. These may not affect bonuses but are likely to keep the government from allowing all its ‘equity’ in Citi, BofA and others to be paid off.

However, this partnership between governments and banks is also likely to bear some fruit in the tight infrastructure financing space despite the step up from private equity and ETFs

Bowing to calls for restraint in tough economic times, Goldman said that its most senior executives would forgo cash bonuses this year. Instead, the 30 executives will be paid in the form of long-term stock — an arrangement that means they will not get big year-end paydays, but one that could turn out to be enormously lucrative if Goldman’s share price rises over time.

The move is meant to address concerns that bankers and traders in the past benefited from short-term performance. The shift at Goldman locks up the executives’ rewards for five years and enables Goldman to claw back the bonuses in the event the bank’s business sours.

Goldman did not say how much it would pay the executives, suggesting the bank would continue a practice — widely followed in investment banking — of allocating roughly half its annual revenue for compensation. While their bonuses will be paid in long-term stock, the payouts are likely to be worth many millions of dollars.

via Executives at Goldman Sachs Will Forgo Cash Bonuses – NYTimes.com.

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This entry was posted on December 11, 2009 by in Financial Markets, GDOW, Global, TARP, Uncategorized and tagged , , , , , , , .

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