Goldman Sachs executives who are expected to receive some $20 billion in bonuses in 2009 will receive the payments in the form of company shares that they cannot sell for five years, the New York-based group said Thursday 11 December. Goldman has been at the centre of a heated public debate over compensation to managers in financial institutions that were bailed out by their governments some months ago. The new policy is designed to align compensation with longer-term performance but it leaves open the issue of the size of bonuses. The company will be allowed, under the new plan, to defer the expense of compensation so it will not report this for 2009.
Links to other sites: Bloomberg, Reuters and Goldman Sachs announcement
The New York Times in a hard-hitting weekend article lashed out at Goldman Sachs and suggested that the bank should forget about employee bonuses and make a major donation to the US government. It points out that while the bank has repaid $10 billion, it owes taxpayers far more than that, and it calls the $16 billion the bank is planning to pay its workers to be rejigged: “A multibillion-dollar gift to the federal Bureau of the Public Debt, which accepts tax-deductible donations to reduce the national debt. The donation can come from the bonuses; that way, it would not harm shareholders, because they only get their cut after the bonuses are paid.”
Links to other sites: New York Times opinion page, Reuters
US bank Goldman Sachs is fighting a backlash against its plans to share profits with staff by opening a fund that will use the equivalent of about 2.3 percent of staff remuneration, or $500 million to help 10,000 small businesses. The bank Tuesday 17 November apologized publicly for the role it played in the global economic crisis. Goldman has recovered, with analysts saying they expect it to pay close to $22 billion in compensation to staff in 2009. Warren Buffett, a Goldman investor who will oversee the small business programme, told the FT it is not designed to compensate for the bank’s errors.
Links to other sites: Bloomberg, Financial Times, Yahoo Finance
Swiss Re building in London. © 2009 Swiss Re
Zurich, Switzerland (GenevaLunch) – Swiss Re, a major Swiss reinsurance company, announced 20 October it had issued $290 million in catastrophe bonds for Mexico in four categories, or tranches, together with Goldman Sachs. The bonds allow Mexico to plan for catastrophes like hurricanes and earthquakes and pass on the costs to private investors. It is the first time that a country taps the financial markets for catastrophe insurance.
Zurich, Switzerland (GenevaLunch) – Bank UBS is making headlines again but for two separate reasons: the bank told Dow-Jones it has hired Matthias Frisch as the new head of its Swiss Investment Banking arm. He replaces Andy Haeberli and comes from Horizon21 and previously spent 14 years with Goldman Sachs. And the Swiss Stock Exchange announced Friday morning that it is investigating the bank for “possible breaches of the Directive on Ad hoc Publicity and the Directive on Information relating to Corporate Governance by UBS AG.
The Financial Times reports that Goldman Sachs executives are likely to come under fire from US lawmakers over the sale of $700 million in stock by senior executives last September, when the investment company was still benefiting from a $10 billion bailout from the government. The company is now expected to show a profit for the second quarter of 2009.
US financial powerhouse Goldman Sachs may beat its 2007 record earnings in trading revenues this year, according to analysts, after receiving $10 billion in government money earlier this year to sell its bonds. The money has since been paid back. Income from trading, in a market where many others still fear to tread, may be up 4.3 percent this year. Goldman has said it will set aside 44.2 percent of income to pay salaries and bonuses this year, reports Bloomberg.
AIG (American International Group) is scheduled to pay its senior executives bonuses 15 July and is “seeking clearance” from the US government’s compensation czar (Wall Street Journal). AIG had to be rescued from bankruptcy by the US Treasury earlier this year and was heavily criticized for paying $165 million in bonuses to the unit whose business practices almost drove it into the ground, notes Reuters.
The four emerging major markets known as the BRIC nations are holding their first summit this week in Moscow to discuss common issues, one of which is the idea of an investment alternative to the US dollar. Brazil, Russia, India and China together account for 15 percent of the $60.7 trillion global economy, reports Reuters, which quotes Goldman Sachs as saying that in 20 years the four could “dwarf” the G7 economies and China’s economy could be larger than that of the US.
In a speech to the Council of Institutional Investors in the US, pocked by protestors’ jeers and boos aimed at the protestors, Goldman Sachs CEO Lloyd Blankfein suggested that Wall Street and banking firms need to dramatically change compensation packages, among other reforms. Reuters The Financial Times reports that in his speech he argued that “Employ American” rules tacked to bailout money for banks is protectionist and could prompt a negative reaction outside the US. Goldman Sachs has received $10 billion in US government aid.
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