Goldman boss urges end to bonus culture
LONG-TERM guaranteed bonuses should be banned and clawbacks introduced into contracts to prevent the excessive risk-taking of the past, Goldman Sachs chief executive Lloyd Blankfein said yesterday.
Speaking at the Banks in Transition conference in Frankfurt, Blankfein said there was “little justification of outsized discretionary compensation when a financial institution has lost money”.
He said bonuses should have a greater weighting towards stock payouts, while top earners should get most of their payouts in deferred stock. Only junior staff should receive their bonuses in cash, he said.
The Goldman supremo’s criticism of remuneration practices will raise eyebrows given that the bank put aside a record $11.4bn (£6.9bn) pay pot in the first half of 2009. He also attacked some investment banking products as being of no use to society. “The industry let the growth and complexity in new instruments outstrip their economic and social utility as well as the operational capacity to manage them,” said Blankfein.
Blankfein, whose bank recorded record second-quarter profit on the back of stellar performances in trading and underwriting, added that banks were “healing” and that the “worst of this crisis is off the table”.
On the collapse of Lehman Brothers, he said that while the bank’s demise was extremely regrettable, saving it could have led to a public backlash that might have prevented the government from rescuing the next, potentially much larger, bank to face problems.