Everybody's been talking lately about Goldman Sachs's image problem. We devoted our cover to to the topic last month, and as the summer progressed, CEO Lloyd Blankfein has reportedly been losing sleep over how to combat the bad publicity — and even went so far as to order his executives not to make any splashy purchases after a blockbuster second quarter, in order to avoid pissing off taxpayers who dramatically bailed the company out less than a year ago. The way CNBC's Charlie Gasparino reports it, when it comes bonus time, Blankfein is "really concerned" that if he doesn't pay his execs, "many will simply jump ship to other firms — including private-equity firms — that will. If he does, he faces endless negative coverage." Gasparino calls this situation "untenable for any CEO." Blankfein now has a veritable Sophie's choice to make from a menu of three compensation-package options.
1. Goldman could switch the ratio of stock and cash bonuses, so that this year executives would be paid with a higher percentage of stocks — which have climbed somewhat steadily since rock bottom last fall, going up over $100 a share. Though they'd still be making somewhere around 45 percent of the bonuses in cash, this would make the onetime payouts, when put all together, seem less gargantuan.
2. Goldman might largely just forgo bonuses and use the cash influx to buy its stock back on the open market. According to Gasparino, "because most of its executives have large pieces of their net worth tied up in shares of Goldman, the wealth effect would be bigger and less sensational than paying all those huge bonus packages at the end of the year."
3. The bank could switch the compensation weight, at least for a while, so that executives would make a much larger set salary and small fluctuating bonus. Again, no big media fuss over bonuses, and suddenly your annual intake isn't based on the economy or your performance anymore. Woo-hoo!
Basically, the idea of all of them is to hide the money behind at least one thin layer of stocks so that it will be just that much harder for cable newsreaders to alarm taxpayers. Blankfein has been losing sleep and reportedly "looks like shit" because of the stress of this concern.
It's funny, what keeps us up at night are things like the fear of losing our job, and that scene where Amy Smart dies in the movie Mirrors. But tricking the taxpayers who bailed us out into believing we weren't receiving multi-million-dollar payouts on their backs — yeah, we can see how that would do it, too.
Goldman Execs Blame Anti-Semitism [Daily Beast]