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16-12-2010, 08:12 AM
Goldman Execs to Get $111 Million in 2007, 2009 Bonuses
By Michael J. Moore and Christine Harper - Dec 15, 2010
Goldman Sachs Group Inc.'s top executives will get about $111.3 million in stock next month in a delayed payout from last year and their record-setting 2007 awards, even as Wall Street prepares for lower bonuses.
Chief Executive Officer Lloyd C. Blankfein, 56, is poised to receive about $24.3 million in January, based on the closing share price on Dec. 14, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock's value since it was granted at $218.86.
Within a year after the bonuses were approved, Goldman Sachs took $10 billion of U.S. bailout funds, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the New York-based firm paid $550 million to settle U.S. regulators' fraud charges related to a mortgage security the company sold in 2007.
"Clearly we now look back and say, 'Were things fine? Should they have paid? Maybe not," said Jeanne Branthover, a managing director at recruitment firm Boyden Global Executive Search in New York. "There's nothing you can do about it. The payouts were in stone. But hopefully, in the future, they won't be."
Deferred Stock
Since the 2008 credit crisis wiped out competitors such as Lehman Brothers Holdings Inc. and led to unprecedented government assistance to financial institutions, regulators have encouraged banks to pay senior employees with deferred stock and recoup payouts if trading strategies backfire. Blankfein and Cohn, who received cash awards of $27 million and $26.6 million respectively for 2007, didn't get any bonuses for 2008 and received only restricted stock for 2009.
Goldman Sachs announced on Dec. 10, 2009, that all 30 members of its management committee would receive only restricted stock for their year-end bonuses. The company hasn't made a similar announcement this year. Through the first nine months of 2010, Goldman Sachs set aside $13.1 billion to cover compensation and benefits expenses, or enough to pay each of its 35,400 employees $370,706 apiece. A year earlier, the average was $527,192 per employee.
The payments come as bonuses across Wall Street are expected to decline. Compensation for trading and investment- banking employees is likely to be down 22 percent to 28 percent from last year, according to Options Group, an executive search and compensation consultant firm in New York. Morgan Stanley has told some employees to expect investment-banking bonuses to decline 10 percent to 30 percent, two people briefed on the matter said earlier this month.
Record Profit
Goldman Sachs's 23 percent share-price decline from the last day of 2007 compares with a 16 percent drop in the Standard & Poor's 500 Index over the same period and a 47 percent plunge in the S&P 500 Financials Index. While the firm's profit tumbled 80 percent in 2008 from the $11.6 billion earned in 2007, last year the company recovered to post a $13.4 billion record profit. So far this year earnings have been lower.
Among the scheduled January payouts are $21.3 million to Chief Financial Officer David Viniar; $20.8 million to former co-president Jon Winkelried, who left the firm in March 2009; and $14.3 million to Edward C. Forst, co-head of investment management, who left in 2008 and returned to Goldman Sachs a year later.
The amounts are based on the Dec. 14 closing share price of $167.33, which is likely to change by the time the stock is delivered next month.
David Wells, a spokesman for Goldman Sachs in New York, declined to comment.
Dimon, Mack
JPMorgan Chase & Co. CEO Jamie Dimon, 54, is set to receive $6.8 million worth of shares next month that were awarded for 2007. John Mack, 66, who served as CEO of New York-based Morgan Stanley until this year, didn't take a bonus in 2007, 2008 or 2009. He will receive about $5.4 million of previously vested shares in January that Morgan Stanley awarded him for 2005.
Of the $111.3 million in restricted stock awards due to be doled out in January, $94.9 million was from 2007 grants, the filings show. While Vice Chairmen John S. Weinberg and J. Michael Evans will each receive $3.3 million from their 2009 bonus grants, their 2007 awards weren't published in the proxy.
Buffett Agreement
The executives will be restrained from cashing in the stock they receive. Blankfein, Cohn, Winkelried and Viniar were all required to keep 90 percent of their shares under an agreement reached with Berkshire Hathaway Inc., the company controlled by billionaire Warren Buffett, when it bought $5 billion of the firm's preferred stock in 2008. That limit expires when Buffett's investment is repaid or on Oct. 1, 2011, whichever comes soonest.
Even before the Buffett restrictions were imposed, Goldman Sachs's CEO, CFO, presidents and vice chairmen were required to keep at least 75 percent of the shares they had received since becoming senior executive officers, with the exception of shares received in Goldman Sachs's 1999 initial public offering or through any acquisition by Goldman Sachs. Morgan Stanley and JPMorgan also require top executives to retain 75 percent of the shares they are awarded.
About 88 percent of the 2007 awards were restricted stock units the firm granted for performance, which were vested at that time. The executives receive the shares underlying those units in January 2011. The remaining 12 percent are shares the executives purchased at a 25 percent discount using their 2007 cash bonuses. Those shares are either delivered or have restrictions lifted next month.
Stock Options
The executives also received stock options in 2007 that become exercisable in January. The options, which expire on Nov. 24, 2017, are unlikely to be exercised immediately because the shares are below the strike price of $204.16.
The January bonus awards will probably trigger varying reactions among different groups of people, Branthover said.
"The public will be outraged," she said. "Wall Streeters will be excited that there's still money being made on Wall Street, and there's still a reason to be working so hard."
To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.
Tats a lot of money, for a bad 2007
By Michael J. Moore and Christine Harper - Dec 15, 2010
Goldman Sachs Group Inc.'s top executives will get about $111.3 million in stock next month in a delayed payout from last year and their record-setting 2007 awards, even as Wall Street prepares for lower bonuses.
Chief Executive Officer Lloyd C. Blankfein, 56, is poised to receive about $24.3 million in January, based on the closing share price on Dec. 14, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock's value since it was granted at $218.86.
Within a year after the bonuses were approved, Goldman Sachs took $10 billion of U.S. bailout funds, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the New York-based firm paid $550 million to settle U.S. regulators' fraud charges related to a mortgage security the company sold in 2007.
"Clearly we now look back and say, 'Were things fine? Should they have paid? Maybe not," said Jeanne Branthover, a managing director at recruitment firm Boyden Global Executive Search in New York. "There's nothing you can do about it. The payouts were in stone. But hopefully, in the future, they won't be."
Deferred Stock
Since the 2008 credit crisis wiped out competitors such as Lehman Brothers Holdings Inc. and led to unprecedented government assistance to financial institutions, regulators have encouraged banks to pay senior employees with deferred stock and recoup payouts if trading strategies backfire. Blankfein and Cohn, who received cash awards of $27 million and $26.6 million respectively for 2007, didn't get any bonuses for 2008 and received only restricted stock for 2009.
Goldman Sachs announced on Dec. 10, 2009, that all 30 members of its management committee would receive only restricted stock for their year-end bonuses. The company hasn't made a similar announcement this year. Through the first nine months of 2010, Goldman Sachs set aside $13.1 billion to cover compensation and benefits expenses, or enough to pay each of its 35,400 employees $370,706 apiece. A year earlier, the average was $527,192 per employee.
The payments come as bonuses across Wall Street are expected to decline. Compensation for trading and investment- banking employees is likely to be down 22 percent to 28 percent from last year, according to Options Group, an executive search and compensation consultant firm in New York. Morgan Stanley has told some employees to expect investment-banking bonuses to decline 10 percent to 30 percent, two people briefed on the matter said earlier this month.
Record Profit
Goldman Sachs's 23 percent share-price decline from the last day of 2007 compares with a 16 percent drop in the Standard & Poor's 500 Index over the same period and a 47 percent plunge in the S&P 500 Financials Index. While the firm's profit tumbled 80 percent in 2008 from the $11.6 billion earned in 2007, last year the company recovered to post a $13.4 billion record profit. So far this year earnings have been lower.
Among the scheduled January payouts are $21.3 million to Chief Financial Officer David Viniar; $20.8 million to former co-president Jon Winkelried, who left the firm in March 2009; and $14.3 million to Edward C. Forst, co-head of investment management, who left in 2008 and returned to Goldman Sachs a year later.
The amounts are based on the Dec. 14 closing share price of $167.33, which is likely to change by the time the stock is delivered next month.
David Wells, a spokesman for Goldman Sachs in New York, declined to comment.
Dimon, Mack
JPMorgan Chase & Co. CEO Jamie Dimon, 54, is set to receive $6.8 million worth of shares next month that were awarded for 2007. John Mack, 66, who served as CEO of New York-based Morgan Stanley until this year, didn't take a bonus in 2007, 2008 or 2009. He will receive about $5.4 million of previously vested shares in January that Morgan Stanley awarded him for 2005.
Of the $111.3 million in restricted stock awards due to be doled out in January, $94.9 million was from 2007 grants, the filings show. While Vice Chairmen John S. Weinberg and J. Michael Evans will each receive $3.3 million from their 2009 bonus grants, their 2007 awards weren't published in the proxy.
Buffett Agreement
The executives will be restrained from cashing in the stock they receive. Blankfein, Cohn, Winkelried and Viniar were all required to keep 90 percent of their shares under an agreement reached with Berkshire Hathaway Inc., the company controlled by billionaire Warren Buffett, when it bought $5 billion of the firm's preferred stock in 2008. That limit expires when Buffett's investment is repaid or on Oct. 1, 2011, whichever comes soonest.
Even before the Buffett restrictions were imposed, Goldman Sachs's CEO, CFO, presidents and vice chairmen were required to keep at least 75 percent of the shares they had received since becoming senior executive officers, with the exception of shares received in Goldman Sachs's 1999 initial public offering or through any acquisition by Goldman Sachs. Morgan Stanley and JPMorgan also require top executives to retain 75 percent of the shares they are awarded.
About 88 percent of the 2007 awards were restricted stock units the firm granted for performance, which were vested at that time. The executives receive the shares underlying those units in January 2011. The remaining 12 percent are shares the executives purchased at a 25 percent discount using their 2007 cash bonuses. Those shares are either delivered or have restrictions lifted next month.
Stock Options
The executives also received stock options in 2007 that become exercisable in January. The options, which expire on Nov. 24, 2017, are unlikely to be exercised immediately because the shares are below the strike price of $204.16.
The January bonus awards will probably trigger varying reactions among different groups of people, Branthover said.
"The public will be outraged," she said. "Wall Streeters will be excited that there's still money being made on Wall Street, and there's still a reason to be working so hard."
To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.
Tats a lot of money, for a bad 2007
