Yes Virginia…There Will Be No Bonuses for Top Goldman Executives This Christmas

After months of internal debate at Goldman Sachs, the seven top executives at the firm, including Chief Executive Officer Lloyd Blankfein, have asked the board’s compensation committee not to give them bonuses in 2008. Isn’t that nice of them?

From the Associated Press:

Better to be a broker than a baron on Wall Street if you’re expecting a big bonus this year.

The decision by top Goldman Sachs executives to forgo bonuses in 2008 is forcing other investment bank bosses to consider following suit. But thousands of lower-tier brokers will still collect hefty bonuses as firms try to keep their top talent from bolting for boutique firms or other industries.

Wall Street employees often receive up to 80 percent of their total compensation from year-end bonuses. Now those payments are attracting more scrutiny from lawmakers and consumer groups because taxpayers are footing the bill for the government’s $700 billion financial bailout.

“Nobody is going to be stupid enough to pay their CEO an outlandish amount of money in this climate,” said Alan Johnson, managing director of New York-based compensation consulting firm Johnson Associates.

He estimates Wall Street CEOs will see their bonuses reduced by up to 70 percent this year.

Goldman Sachs Group Inc. announced Sunday that seven executives, including Chief Executive Lloyd Blankfein, would get no cash or stock bonuses for 2008.

Blankfein received total compensation of $54 million last year, according to calculations by The Associated Press, making him the sixth-highest-paid CEO of a Standard & Poor’s 500 company in 2007.

It’s the first time top Goldman executives have not received bonuses since the 139-year-old investment bank went public in 1999. The executives decided to forgo the payments this time “because they believe it’s the right thing to do,” Goldman spokesman Michael DuVally said.

From BusinessWeek:

Much has been made today of the news that Goldman Sachs’ top seven executives, including CEO Lloyd Blankfein, are giving up their bonuses for 2008. According to a story in today’s Wall Street Journal, the move follows “months of internal debate” at the Wall Street firm, and that now that Goldman has acted, other firms on “Lloyd watch,” as the Journal calls it, will follow suit. Indeed, Swiss bank UBS has already done so, axing bonuses for its executive board members. The WSJ’s DealJournal blog referred to the bonus cut as “The Neutron Bomb of Wall Street.”

But really, how much debate was there? Would Blankfein really have ever gotten a hefty bonus in a year when plenty of CEOs of other struggling companies not part of the bailout have passed up on bonuses and even taken pay cuts? Sure, $68.5 million—the total size of Blankfein’s enormous package last year—was a lot to consider giving up. But with the uproar over bankers pay at a fever pitch, did they really ever consider paying those bonuses?

More telling, if less substantial, I believe, is that some companies outside the maelstrom of the financial crisis have been trimming top executive salaries and slashing bonuses. Earlier this year, JetBlue Airways CEO Dave Barger and Continental Airlines chief Larry Kellner cut their salaries; Kellner also relinquished his bonus. Executive compensation consulting firm Equilar searched its database for BusinessWeek and turned up several recent examples of CEOs whose pay had been trimmed, including Gannett’s chief, who is taking a 17% pay cut. NVIDIA’s board accepted a management proposal (because these are always proposed by management, of course) to do away with cash incentives. Even directors’ pay is getting cut: At RV maker Thor Industries, each of the non-employee directors is forgoing 15% of pay “due to the decline in the Company’s profits in fiscal 2008.”

When companies are restructuring and laying off workers, as Goldman and many of the other banks are in the process of doing, many management consultants acknowledge it’s a best practice for CEOs to share in the pain somehow. When that firm is also receiving government bailout funds, cutting top executive bonuses should be a necessary practice. And one that doesn’t need a lot of debate.

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Tags: Alan Johnson, Blankfein, Continental Airlines, Credit Crisis, Dave Barger, Dow Jones, Economic Crisis, Economy, Equilar, Executive Bonus, Goldman, Goldman Sachs, Goldman Sachs Group, JetBlue, Larry Kellner, Lloyd Blankfein, Michael DuVally, NVIDIA, S&P, Stock Market, Thor Industries, Wall Street

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