The year-end sacks of gold are going to be a lot lighter for the head honchos at Goldman Sachs.
Caught in the global fiscal crisis and facing increased public scrutiny, the longtime king of the investment banks said yesterday that its seven top execs will not be getting bonuses this year, in a move that could lead to similar cuts across Wall Street.
The executives – who are accustomed to the highest salaries in financial services – went to their board of directors on Friday with a proposal to give up the bonuses, the company said.
The board granted the request yesterday.
“Notwithstanding the fact that the firm has distinguished itself in many aspects of this crisis, we can’t ignore the ongoing economic distress, nor can we ignore public scrutiny,” Goldman spokesman Lucas van Praag said.
Topping the list of the bonus-deprived is CEO Lloyd Blankfein. He will still pocket a salary of about $600,000, but that’s minuscule compared to the $68.5 million in salary, bonuses and stock he took home last year – just as the credit crunch was starting.
Other lighter-pocketed execs include Co-Presidents Jon Winkelried and Gary Cohn, who each earned $67.5 million in cash and stock in 2007, and Chief Financial Officer David Viniar, who took home $57.5 million.
They will all get only their base pay of $600,000.
The 2007 salaries of the other three, Vice Chairmen J. Michael Evans, John Weinberg and Michael Sherwood, were not reported, but they, too, will take home $600,000 this year.
State Attorney General Andrew Cuomo – who has demanded that the nine major banks receiving federal rescue funds provide a “detailed accounting” of their top executives’ bonuses – called the decision a “step in the right direction.”
“This gesture by Goldman Sachs is appropriate and prudent and hopefully will help bring Wall Street to its senses. We strongly encourage other banks to follow Goldman Sachs’ step,” he said.
Goldman received $10 billion in the first round of government disbursements, which has so far totaled $125 billion.
The taxpayer money – originally intended to purchase so-called toxic securities from financial institutions – was instead invested in the banks.
Goldman has fared better than many of its peers since Wall Street has been rocked by the worst financial crisis since the Great Depression, but its stock has been hammered. So far, it is down more than 60 percent this year.
In September, Goldman sought expedited approval from the Federal Reserve to become a bank holding company, allowing it to have a commercial banking division.
The Goldman move on bonuses will likely force the boards of other firms, like Morgan Stanley and Merrill Lynch, to follow suit and dramatically cut back on their executives’ compensation. Goldman is often viewed as the bonus bellwether, even in good times.
“They are going to be really pissed off,” said one Wall Street observer, referring to the reaction of Goldman’s peers.
Elsewhere, Swiss bank UBS is expected to announce the details of a new executive-compensation plan today.
That plan may freeze bonus payments for senior managers for three years following widespread criticism of the $60 billion bailout it got from the Swiss government last month.
On the job front, JPMorgan Chase may become the next bank to wielding the hatchet. The Sunday Telegraph in London reported the bank could soon lay off about 3,000 people worldwide.