FT.com - article

Goldman Sachs moved to quell public anger over executive pay on Thursday by unveiling plans to eliminate cash bonuses for its top 30 executives this year and give shareholders a vote on compensation. The new policies come as some of the world’s financial capitals weigh steep taxes on bonuses paid to employees of banks that drew government support during the credit crisis. Goldman’s rapid recovery from the downturn, and the likely windfall many employees will reap next month thanks to surging profits, has made the bank a frequent target for politicians and shareholders. “The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders’ meeting in May,” Lloyd Blankfein, Goldman’s chief executive, said on Thursday in a statement. “We believe our compensation policies are the strongest in our industry.” The 30 members of Goldman’s management committee will receive their entire 2009 bonus in stock awards that must be held for five years. Those restricted shares can be reduced if the bank finds that the employee failed to properly analyse or disclose risks. Goldman will also give investors a non-binding, advisory vote on the bank’s compensations principles as well as the payouts to its top officers, including Mr Blankfein, at its 2010 annual meeting. Large shareholders and corporate-governance advocates have pressed high-profile companies like Goldman to add such a provision before the US Congress passes legislation requiring the so-called “say on pay” vote. Hye-Won Choi, head of corporate governance at TIAA-Cref, a giant retirement fund and a major Goldman investor, welcomed the changes saying the bank’s management had shown ”strong leadership on an issue of critical concern to shareholders”. Goldman executives have argued publicly that the bank has consistently paid out a smaller portion of its net revenues than most if not all of their peers. Meantime, though, they have met privately with top investors and regulators to glean their advice on how to tweak their compensation policies to stem the public outcry. Goldman earned $12.5bn through the first nine months of 2009, helping to double the bank’s share price. During that period, the bank set aside $16.7bn for pay, health insurance and other benefits, or 43 per cent of the net revenues. People familiar with Goldman’s thinking told the FT last week that the bank was also considering paying out a larger portion of the greater bonus pool in equity. Goldman employees currently receive as much as 75 per cent of their annual payouts in restricted stock or options. Wall Street firms’ compensation ratios typically fall during the fourth quarter as they adjust the pool of funds they have set aside to reflect actual payouts they will make to employees. Additional reporting by Francesco Guerrera in New York