Goldman’s high-flyers feel the pinch

THE 100 most senior employees at Goldman Sachs in London will have their total pay capped at pound stg. 1 million ($1.78m) when the Wall Street bank reveals its 2009 bonuses this week, in a nod to the government's calls for cutbacks in bankers' pay.

Less senior British employees who are awarded more than pound stg. 1m for their work last year will have 60 per cent of any amount over pound stg. 1m paid in deferred stock, in line with Financial Services Authority guidelines.

Goldman Sachs’s 32,500 workers worldwide will share the burden of Britain’s one-off 50 per cent tax on bonuses above pound stg. 25,000, which is likely to reduce the bank’s compensation pool by hundreds of millions of dollars.

Analysts estimated that the tax sliced about pound stg. 300m from the pay pool of JPMorgan, a rival bank, which was pound stg. 9.3 billion for 2009.

Wall Street’s most successful bank, which employs about 5500 people in London, said last Thursday that it had set aside $US16.2bn ($17.9bn) for bonuses for 2009, well below the $US20.2bn record pay pool of 2007.

Announcing a $US13.4bn net profit for last year on net revenues of $US45bn, only 2 per cent lower than 2007, David Viniar, Goldman Sachs’s finance director, said the bank had shown “restraint” in awarding pay. “We’re not blind to the pain and suffering still going on around the world and we’re not deaf to the calls for restraint. We heard them,” he said.

Goldman Sachs’s partners will wear a disproportionate amount of the cuts to the reduced pay pool, in the same way that they are paid the most generously in bumper years.

There are about 100 partners in London, all of whom will be paid no more than $US1m for last year. All Goldman Sachs partners around the world will receive 60 per cent of their bonuses in stock that will vest over the next three years but cannot be sold for five years.

Goldman Sachs had already said that its 30-member management committee would receive their entire 2009 bonuses in stock.

The partners’ compensation shrank in the fourth quarter when the bank allocated $US519m out of its pay pool to Goldman Sachs Gives, its charity. Of the $US519m, $US500m was cash that had been allocated for partners’ pay.

Goldman Sachs and other banks also face a US tax designed to raise as much as $US117bn to cover the cost of the Obama administration’s bailout.