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US: No Bonuses for 7 Senior Executives at Goldman


by BEN WHITEThe New York Times
November 16th, 2008

Published: November 16, 2008

As public scrutiny of Wall Street pay intensifies, one bank has already decided what it will award in bonuses to its top seven executives this year: nothing.

Top executives at Goldman Sachs sent a request to the company’s directors on Sunday asking that they receive no bonus pay for their work in 2008, and the directors agreed, a company spokesman said.

The decision is likely to put heavy pressure on Goldman Sachs’s competitors, including Morgan Stanley, to take similar action as they decide on year-end bonus figures in the coming weeks.

The move could also ease political pressure on Goldman Sachs and reduce negative reaction to what is expected to be a bleak fourth-quarter earnings report from the bank in December, including perhaps its first loss of the credit crisis.

It comes after the nation’s largest banks, buckling under bad mortgage debts and sinking share prices, won approval for a $700 billion bailout from the federal government, including $300 billion in direct equity investments. Goldman and Morgan each received $10 billion. The bailout package includes some strictures on executive pay, but the industry does not view them as especially strong.

Public officials including the New York attorney general, Andrew M. Cuomo, and Representative Henry A. Waxman, Democrat of California, have been warning banks not to use any taxpayer money to award bonuses to executives. Industry lobbyists and interest groups have also warned executives at the banks that any big pay numbers this year could generate a significant public backlash.

Both Mr. Waxman and Mr. Cuomo have requested detailed information from the nation’s largest banks on what they intend to pay this year and how they structured pay in previous years.

There is a widespread belief that the way Wall Street awarded bonuses in recent years helped feed the risky behavior that eventually created big losses on exotic debt securities and helped create the current crisis.

In a statement Sunday, Mr. Cuomo said, “This gesture by Goldman Sachs is appropriate and prudent and hopefully will help bring Wall Street to its senses. We strongly encourage other banks to follow Goldman Sachs’s step.”

Morgan Stanley and other banks are still formulating bonus figures. Morgan Stanley’s chief executive, John J. Mack, took no bonus last year. Morgan Stanley, which took a loss in the fourth quarter last year but has been profitable all of this year, declined to comment Sunday. Morgan Stanley posted better results in the third quarter than Goldman Sachs.

In September, Goldman Sachs and Morgan Stanley transformed themselves into bank holding companies that take deposits, take less risk and are subject to more government oversight. That new structure may limit their ability to generate big profits, because they cannot use as much borrowed money to make big investment bets.

In the last several years, Goldman Sachs has posted some of the biggest profits and paid out some of the biggest bonuses in Wall Street history. The company’s chief executive, Lloyd C. Blankfein, received a salary and bonus package last year worth $68.5 million. Goldman Sachs paid its two co-presidents, Gary D. Cohn and Jon Winkelried, around $67.5 million each last year, more than most chief executives. All three will receive no bonuses this year.

Others forgoing bonuses at Goldman Sachs will include the chief financial officer, David A. Viniar, and the vice chairmen, J. Michael Evans, Michael S. Sherwood and John S. Weinberg.

All seven executives told the bank’s compensation committee on Sunday that they did not want to receive bonuses this year. The committee accepted their request, said Lucas van Praag, a Goldman Sachs spokesman.

“They believe it’s the right thing to do,” Mr. van Praag said. “We can’t ignore the fact that we are part of an industry that’s associated with ongoing economic distress.”

While Goldman Sachs has not posted a loss, its shares have been in free fall all year. They rallied slightly in September after the investor Warren E. Buffett helped shore up fading confidence in the bank with a $5 billion investment.

But the shares quickly resumed their decline. They are off 69 percent this year, at $66.73.

Louise Story contributed reporting.





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