Goldman executives’ big fat pay linked to performance

Goldman Sachs executives are going to have to wait a little bit longer before they can collect their 2014 pay packages.

Goldman Sachs Group chief executive Lloyd Blankfein and other top executives of the investment bank are going to have to wait a little bit longer before they can fully collect their 2014 pay packages.

For the first time, Goldman’s compensation committee has decided that a chunk of the awards given to senior management for the previous year will take the form of performance-based restricted stock that will pay out in full only if certain profitability targets are hit in coming years.

Specifically, Goldman’s average return on equity will have to meet or exceed 11 per cent between 2015 and 2017 for executives to receive the total rewards.

The new structure of compensation for Goldman leaders was “based on shareholder feedback” and “ties their compensation more closely to firm performance”, according to a bank filing.

About 30 per cent of the $US24 million ($31m) compensation package Mr Blankfein was awarded for 2014 were in these kinds of stock units.

Goldman president Gary Cohn and finance chief Harvey Schwartz, each of whom were awarded $US22m for 2014, also had about 30 per cent of their packages take the form of performance-restricted stock.

The firm’s compensation committee considered improvement in net revenues, earnings per share and book value per share as well as the continued outperformance in Goldman’s return on equity relative to peers including Bank of America, Citigroup, JPMorgan Chase and Morgan Stanley, the filing said.

Goldman also made changes to delay additional awards to executives under its long-term incentive plan. The top leaders at the bank will have to wait eight years to see such payouts, which occur only if certain milestones for returns on equity and book value are met. Previously, such awards were paid out after three years, though the compensation committee had the option to extend the performance period to eight years, which it had always elected to exercise.

As part of the rewards given in the latest long-term incentive plan, Mr Blankfein could receive an extra $US7m, and Mr Cohn and Mr Schwartz could get an extra $US6.7m each if they meet the targets.

In his annual letter to shareholders, Mr Blankfein elaborated the firm’s achievements in 2014, including advising on more than $US1 trillion in deals. He said the current level of deal-making activity remained below historical averages and that if mergers and acquisitions were to return to more normal levels, global volume would rise by $US630 billion.