Goldman Sachs Ends Cash Bonuses for Top 30 Execs, But Pay Untouched

December 11, 2009

(ChattahBox)—In a move that many critics are calling a PR stunt, Goldman Sachs, perhaps the most despised firm on Wall Street, after AIG, announced on Thursday that it would not pay out end-of-year cash bonuses to 30 of its top executives. Instead, the most senior executives would be awarded company stock that they are barred from selling for five years. The firm’s announcement comes, as Congress is debating the passage of a new set of financial reforms and regulations, to prevent another economic collapse.

Goldman Sachs received a $10-billion government bailout that the firm repaid in full, including interest in June. The financial firm then quickly rebounded, posting earnings of $8.5 billion in the first nine months of 2009, mostly attributed to the controversial practice of high-frequency trading.

The Treasury Department, President Obama and Congressional lawmakers, have been pressuring Wall Street firms to change their compensation practices, which award huge gains for short-term risky investments. The compensation practices were partly responsible for the economic collapse, due to speculation on sub-prime mortgages and the sale of a slew of exotic financial instruments.

Goldman spokesman Samuel Robinson believes the changes in compensation are a major step. “What we have announced today for the 30 most senior people at Goldman Sachs represents a closer alignment than there has ever been of incentives and compensation with the interests of shareholders and the public,” said Robinson.

In addition to a change in bonuses, Goldman Sachs is also for the first time, permitting shareholders to have a “say on pay” votes, although the votes would be nonbinding.

Still, the firm refused to say whether the bonus change would carry over to the following year, and compensation levels remain untouched. Goldman Sachs is on track to pay out compensation totalling $16.7 billion for 2009, which is a 46 percent jump from 2008 and slightly below the $16.9 billion paid out in 2007.

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