NEW YORK—As banks receive federal funding and the economy continues its downward slide, large Wall Street firms are finally bucking the recent compensation trend by slashing year end bonuses.
This week, seven top executives at Goldman Sachs Group Inc.—including CEO Lloyd Blankfein—said they would forego their 2008 cash and stock bonuses, according to company spokesperson.
Goldman spokesman Lucas Van Praag told AP that the decision was made by the executives themselves. “Because they think it’s the right thing to do” given the state of the economy, Van Praag said.
Blankfein received $67.9 million in bonuses last year, according to Goldman’s regulatory filings, and was among the top five highest-paid corporate CEO in 2007.
Across the pond, Swiss banking giant UBS AG said it would stop paying bonuses to its chairman and other executives, starting next year. UBS received a $60 billion government aid last month.
UBS said the bank’s Chairman, Paul Kurer, did not receive a bonus in 2007 and is not expected to receive one at the end of this year. The bank announced that other members of top management could also see their bonuses withheld if the bank underperforms.
“The Chairman of the Board and the members of the Group Executive Board will not receive any variable compensation for 2008,” a company statement said.
The banking sector underwent its worst performing period since the Great Depression. This year we witnessed the failure of Bear Stearns Cos. and Lehman Brothers Holdings, and venerable brokerage house Merrill Lynch was forced to sell itself to Bank of America.
Wall Street employees typically receive around 60 percent of their annual compensation in cash or stock bonuses.
A recent study by compensation consulting firm Johnson Associates suggests that Wall Street firms are expected to slash bonuses by up to 70 percent this year. The steepest cuts would go to high-level executives whose compensation is disclosed in regulatory filings, and the rest of the employees could see their bonuses slashed by as much as 45 percent.
Analysts agree that some form of bonuses should still be paid out for retention purposes, but companies losing billions of dollars should not reward their executives.
“There must be a responsibility on the part of management of firms that received the [TARP] equity infusions to use that capital as capital,” said one report titled “Bonus. What Bonus?” on HedgeFund.net, a leading provider of hedge fund news.
“Yes, the Treasury is right not to dictate the terms of use for the infusions, but doesn’t it seem ridiculous to be paying out such huge bonuses in an industry that has lost billions and caused the near ruin of the worldwide financial system?”
This week, seven top executives at Goldman Sachs Group Inc.—including CEO Lloyd Blankfein—said they would forego their 2008 cash and stock bonuses, according to company spokesperson.
Goldman spokesman Lucas Van Praag told AP that the decision was made by the executives themselves. “Because they think it’s the right thing to do” given the state of the economy, Van Praag said.
Blankfein received $67.9 million in bonuses last year, according to Goldman’s regulatory filings, and was among the top five highest-paid corporate CEO in 2007.
Across the pond, Swiss banking giant UBS AG said it would stop paying bonuses to its chairman and other executives, starting next year. UBS received a $60 billion government aid last month.
UBS said the bank’s Chairman, Paul Kurer, did not receive a bonus in 2007 and is not expected to receive one at the end of this year. The bank announced that other members of top management could also see their bonuses withheld if the bank underperforms.
“The Chairman of the Board and the members of the Group Executive Board will not receive any variable compensation for 2008,” a company statement said.
The banking sector underwent its worst performing period since the Great Depression. This year we witnessed the failure of Bear Stearns Cos. and Lehman Brothers Holdings, and venerable brokerage house Merrill Lynch was forced to sell itself to Bank of America.
Investor Outrage
As the U.S. Treasury and the Federal Reserve step in, the Wall Street players remaining have all but resigned to the fact that the Wall Street compensation structure of old is now a thing of the past.Wall Street employees typically receive around 60 percent of their annual compensation in cash or stock bonuses.
A recent study by compensation consulting firm Johnson Associates suggests that Wall Street firms are expected to slash bonuses by up to 70 percent this year. The steepest cuts would go to high-level executives whose compensation is disclosed in regulatory filings, and the rest of the employees could see their bonuses slashed by as much as 45 percent.
Analysts agree that some form of bonuses should still be paid out for retention purposes, but companies losing billions of dollars should not reward their executives.
“There must be a responsibility on the part of management of firms that received the [TARP] equity infusions to use that capital as capital,” said one report titled “Bonus. What Bonus?” on HedgeFund.net, a leading provider of hedge fund news.
“Yes, the Treasury is right not to dictate the terms of use for the infusions, but doesn’t it seem ridiculous to be paying out such huge bonuses in an industry that has lost billions and caused the near ruin of the worldwide financial system?”
