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ToL: Goldman cuts London stars’ pay

The new limit is likely to cause consternation among the bank’s biggest earners, an elite group dubbed the Masters of the Universe, who have in good years been handed bonuses topping £10m each.


Goldman Sachs slashes London superstars’ pay to £1m

From The Sunday Times
TIMES OF LONDON
January 24, 2010
Iain Dey 25 Comments

Goldman Sachs, the American investment bank, is capping the salary and bonus packages of its top London staff at £1m.

Senior bankers and star traders will be given details of the clampdown later this week. The new limit is likely to cause consternation among the bank’s biggest earners, an elite group dubbed the Masters of the Universe, who have in good years been handed bonuses topping £10m each.

The cap comes amid continuing public anger at the size of banker bonuses. Goldman is prepared to run the risk that some of its top traders could quit in protest.

The initiative is the latest in a string of cuts introduced by banks in response to the government’s 50% tax on bonuses and new pay guidelines from the Financial Services Authority (FSA), the City regulator.

Under the FSA’s rules, anyone earning more than £1m is required to take 60% of their bonus in deferred shares.

Barclays is to defer bonuses by three years while Credit Suisse has cut UK payouts by 30%.

Goldman has just reported a five-fold jump in profits to $13.4 billion (£8.3 billion) last year. However, it is keen to help defuse public anger about bankers profiting from the financial crash.

Members of the bank’s global management committee will take all their pay in deferred shares. Even when the bankers receive the stock, they will not be able to sell any of it until 2015.

Goldman said last week that it would pay a total of $16 billion to its staff — a lower figure than expected, though it still works out at an average of more than £300,000 a head.

Most banks are claiming that they have cut pay substantially. James Gorman, chief executive of Morgan Stanley, has been handed a share-based compensation deal worth close to $9m, according to regulatory filings lodged by the bank on Friday night.

Royal Bank of Scotland is still debating the level of payouts for its investment bankers. The bonuses, which could total as much as £1.5 billion, are likely to be paid in spite of the fact that the group is expected to clock up losses of at least £5 billion for the year.

If the payments are made they will result in a huge political backlash, which RBS is keen to avoid.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6999770.ece