Are Bonuses the Next Bailout Casualty?
Goldman Sachs' decision to forgo handing out bonuses to seven of its top executives could reverberate throughout the economically-weakened Wall Street economy, as firms face blistering quarterly earnings reports and harsh questioning from lawmakers and a cash-strapped public.
The executives called the move the "right thing to do."
A Goldman Sachs spokesman, Lucas Van Praag, told The Associated Press' Madlen Read that seven executives, including chief executive Lloyd Blankenfein, would not get cash or stock bonuses this year.
Last year, Blankenfein took in an estimated $54 million, according to AP calculations, on top of his $600,000 salary. (He will still take home his annual salary this year.)
The Wall Street Journal said Goldman Sachs' decision would be "closely watched" and said it might start a trend. (Elsewhere, John Mack, the chief executive of Morgan Stanley, announced in December that he was giving up his 2007 bonus. His 2006 bonus was worth about $40 million.)
Portfolio.com's Jeffrey Cane noted that Goldman Sachs "is offering up martyrs to the year-end bonus season, recognizing that the public is not in any mood to read about huge multimillion-dollar paydays at a time when the economy is in trouble and Wall Street is being bailed out by the federal government."
Cane called Goldman Sachs "far more savvy about its public image" than American International Group, which angered lawmakers when reports of pricey retreats for top executives and a $1 million-per-month exit package for one poor-performing executive were disclosed at congressional hearings on Capitol Hill.
Rep. Henry Waxman (D-Calif.), the chairman of the House Committee on Oversight and Government Reform, and New York Attorney General Andrew Cuomo have already begun their own independent investigations into potentially illegal bonus payments.
And other European banks have taken similar steps in light of disastrous losses.
Overseas, the Swiss bank UBS announced that its chairman, Peter Kurer, would not receive any bonuses for 2007 or 2008 and that its 12 other board members and other senior managers would see their bonuses "held back" as part of a "bonus-malus" system to discourage risky short-term investments.
UBS has been under pressure to change how it compensates its executives amid revelations of large bonuses and a U.S. federal probe into potential illegal offshore investments by American clients with UBS.
The German Deutsche Bank has already announced it will forgo its 2008 bonuses.
By Derek Kravitz |
November 17, 2008; 2:09 PM ET
Previous: 12 Juveniles at Gitmo, College Leader's Salaries Climb, Bush Could Pardon Spies | Next: Vetting Bill Clinton Could Bring Controversy
Please email us to report offensive comments.
Posted by: UnPatriotic | November 17, 2008 3:31 PM
Posted by: job22 | November 17, 2008 3:44 PM
Posted by: Weribe | November 17, 2008 3:45 PM
Posted by: rcc_2000 | November 17, 2008 4:49 PM
Posted by: forgetthis | November 17, 2008 4:55 PM
Posted by: wayoffbaseguy | November 17, 2008 5:00 PM