By Lauren Tara LaCapra
April 13 Goldman Sachs Group Inc Chief
Executive Lloyd Blankfein's compensation increased 14.5 percent
to $16.2 million in 2011 despite a sharp decline in profits and
share price during the year, leaving the bank open to more
attacks on its pay policies.
Blankfein's pay boost includes stock awards from previous
years that vested in 2011, and therefore does not reflect the
amount that Goldman's board awarded him strictly for the
company's performance last year.
Goldman offered another figure, $12 million, as the amount
Blankfein received for his performance last year. That number
reflects a 35.5 percent decline from 2010, when Blankfein
received $18.6 million in performance pay.
The $16.2 million figure comes from a formula the U.S.
Securities and Exchange Commission requires companies to use
when reporting pay packages in proxy filings, where Goldman
detailed Blankfein's compensation on Friday.
Both the SEC's formula and Goldman's formula include a $2
million salary and a $3 million cash bonus. The SEC formula also
reflects $454,332 Blankfein received last year in benefits and
perks, such as life insurance and a car and driver.
Whichever multimillion-dollar figure is used, Blankfein's
pay package is likely to get attention both outside and inside
Wall Street's most prominent investment bank, where thousands of
traders, bankers and support staff were fired last year due to
"Whether it's $12 million or $16 million, it's excessive,"
said Jack Ucciferri, research and advocacy director at
Harrington Investments Inc, a Goldman shareholder that has a
proposal in Goldman's proxy that, if passed, would require top
executives to retain 75 percent of their stock holdings for at
least three years after leaving the bank.
Goldman earned a $2.5 billion profit during 2011, down from
$3.6 billion in 2010, and its share price fell 46 percent last
year, amid a slowdown in investment banking deals and volatile
Management reduced the average employee's pay by 15 percent
in 2011, to $367,057. That compares with a pre-crisis high of
$568,732 per employee in 2007. The median household income in
the United States is about $50,000.
James Gorman, CEO of Goldman's main rival, Morgan Stanley
, received total compensation of $13 million in 2011, down
14.5 percent from 2010.
Using the bank's performance-based pay calculation, Morgan
Stanley's board awarded Gorman $10.5 million for his work last
year; the only cash component was a salary of $800,000. That was
down 31 percent from $15.2 million the previous year.
Shareholder groups have been urging Wall Street banks to
reform pay policies to align compensation more closely with
The biggest U.S. banks, including Goldman, have implemented
compensation reforms, such as "clawback" provisions and putting
more bonus money in the form of restricted stock, due to new
But Goldman remains a particular target for activists
because of its tendency to pay more than its competitors, and
because of high-profile conflict-of-interest issues involving
senior bank officials in the aftermath of the financial crisis.
In addition to Harrington's proposal, a coalition of
religious groups had wanted the company to implement an annual
review of executive pay. But the SEC rejected the group's
proposal for inclusion in the proxy.
Laura Shaffer Campos, director of shareholder activities at
the Nathan Cummings Foundation, one of the groups that proposed
the annual pay review, said the increase in Blankfein's
compensation puts the bank's reputation at risk.
"Given their stock's lackluster performance and the ongoing
focus on these issues by groups like Occupy Wall Street, this
certainly gives us additional fuel for next year," Campos said
in an interview.
In a letter to shareholders, Blankfein said Goldman has been
engaged in talks with large stakeholders to resolve their
concerns about compensation. Harrington and Nathan Cummings own
relatively small amounts of Goldman stock but have been
influential through their proposals.
"Our engagement with shareholders, in particular, has
provided a productive opportunity to garner feedback on what we
can do better and for our shareholders to learn more about the
Board's priorities," Blankfein wrote. "We received valuable
input from shareholders following our say on pay vote last year,
which reaffirmed our long-held view that pay-for-performance is
the most critical aspect of compensation."
Goldman also reported compensation for its four other named
executive officers: Gary Cohn, president and chief operating
officer; David Viniar, chief financial officer; J. Michael
Evans, vice chairman and head of emerging markets; and John
Weinberg, vice chairman and co-head of investment banking.
Each of these executives received performance-based pay of
$11.85 million last year, which included a $1.85 million salary
and a $3 million bonus.
Using the SEC's calculation of 2011 pay, which includes
previous years' awards that vested in 2011, Cohn, Viniar and
Weinberg received $15.8 million last year, while Evans received
Goldman also shaved the potential long-term cash award that
certain executive officers will get if the company hits profit
targets over a three-year period. Goldman introduced a program
in 2011 that gave each executive the potential to collect $7
million if the average adjusted return-on-equity level from 2011
through the end of 2013 reaches 10 percent and book value grows
an average of 7 percent over the three years.
The grant for the years 2012 through 2015 has been cut to an
initial amount of $3 million, with 50 percent of that paid for
each metric. Goldman's compensation committee also gave itself
discretion in both programs to extend the performance periods by
The ROE and book value targets appeared easily attainable
when they were being established in late 2010, but Goldman's
return on equity has fallen sharply since then. In 2011,
adjusted ROE was just 5.9 percent, compared with levels above 30
percent before the financial crisis.