Facing an uproar over the return of record bonuses so soon after taxpayers bailed out Wall Street, Goldman Sachs announced last week that its 30 top executives would get stock instead of cash bonuses this year, and that shareholders would get to vote on executive pay. The news came after Goldman CEO Lloyd Blankfein launched a charm offensive in November by apologizing for his company's role in the financial meltdown. But Goldman is still awarding billions of dollars in bonuses—rivaling the record payouts of the bubble years—and the shareholder vote won't be binding. Has Goldman turned over a new leaf, or are the changes just window dressing?
This is nothing but a 'PR move': The press is playing this up as if Goldman is "curbing or cutting pay," says Ryan Chittum in the Columbia Journalism Review. "It's doing no such thing." Giving top executives stock they can't immediately sell is supposed to mean they won't "be as tempted to blow up the world economy again in search of a quick buck," but the bottom line is that their bonuses will probably get bigger.
"Overplaying Goldman's bonus move"
It's a step in the right direction: This is Goldman Sachs' "biggest concession yet" to public anger at Wall Street, says Susanne Craig in The Wall Street Journal. Corporate-governance groups like the "say-on-pay" proposal, which, though non-binding, is something Goldman executives had resisted. And since executives can't touch their bonus stock for five years, they'll have greater incentive to build company value.
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The real scandal is that taxpayers don't share Goldman's profits: "Yawn." Goldman's top management was already getting most of its bonuses in stock, says Justin Fox in Time, and it already used "clawbacks" to make sure it wasn't "paying for ephemeral performance." The real issue is that Goldman shareholders and bankers are sharing in Goldman's record 2009 profits—but taxpayers who bailed out the firm last year aren't getting a piece of the "windfall."
"Goldman: It's not the bonuses, it's the profits"
There's good and bad in Goldman's changes: One major complaint about the "bonus culture" was that it encouraged people to make risky short-term bets, says Daniel Indiviglio in The Atlantic, and tying up pay for five years addresses that. But it doesn't shift earnings from bankers to shareholders, which is another touchy issue. The bankers might, however, have to buy smaller yachts for the next five years, until they can cash in their bonus stock.
"Goldman alters bonus policy, but not bonus pool size"
Don't expect anger at Goldman to melt away: Goldman Sachs' "charm offensive" is too little, too late, says Colin Barr in Fortune. In the U.K. and France, the backlash against financial-firm excesses resulted in big taxes on banker bonuses. Lawmakers in the U.S. have been "frosty" to the idea, but if Wall Street firms keep doling out "obscene bonuses" while "people are getting thrown out of their houses in droves," the politicians might change their minds.
"Is a bonus tax in our future?"
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