Seven top executives of Goldman Sachs Group Inc. have asked to forego bonuses for 2008, and the big Swiss bank UBS said its highest-ranking managers also would have to settle for only their salaries this year.
The banks announced the moves after interest groups and some member of Congress raised questions about the propriety of Goldman Sachs and other companies paying billions in year-end bonuses after taking financial aid from the government.
Goldman Sachs got $10 billion in taxpayer money from the Treasury Department last month as part of the government’s plan to inject capital into U.S. financial institutions and unfreeze the credit markets.
Although the company’s chief executive, Lloyd C. Blankfein, won’t be getting a bonus on top of his $600,000 base salary, he should have little trouble making ends meet. His combined salary and cash bonuses for the past four years totaled $90 million.
Goldman Sachs has been one of Wall Street’s strongest performers in recent years, and its compensation levels have reflected that success. However, its profits for the first nine months of 2008 were off 70 percent from the same period last year.
UBS said that, in addition to eliminating executive bonuses this year, it was adopting a new compensation scheme. According to a summary, the company is changing to a long-term model in which variable compensation such as bonuses will depend on sustained performance.
UBS said a substantial portion of the bonuses will not be paid immediately, but will be held by the company and remain at risk, subject to future results.
New York’s attorney general, Andrew Cuomo, suggested that Citigroup Inc. also should cancel bonuses for executives this year. The company said Monday it plans to cut 52,000 jobs over the next year.
“As Citigroup suffers, so too do investors, employees, and taxpayers,” Cuomo said in a prepared statement. “At the very least, Citigroup should follow Goldman Sachs’ lead and announce quickly that top executives will not be receiving bonuses this year. Citigroup’s stated intention to wait until the new year to make its bonus decisions is a mistake. After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times.”
Citigroup got $25 billion in funding from the Treasury Department last month.