Goldman Sachs on Wednesday appeared to deflect attention from what are expected to be record bonus pay-outs by setting up a new philanthropic fund to receive a portion of some senior executives’ compensation.
Goldman, which has continued to post record profits in spite of the credit squeeze, is expected to pay Lloyd Blankfein, chief executive, substantially more than the $54m he earned last year, a figure that made him the best paid chief executive at a publicly traded Wall Street bank.
Gary Cohn and Jon Winkelried, Goldman’s co-presidents, each took home compensation packages worth about $53m last year and are expected to get even more this year. Goldman is also expected to award by far the largest investment banker bonuses from a pool expected to exceed $75bn for all Wall Street banks.
In September, Goldman said it earned $2.85bn in the third quarter, driven by record net revenues in its dominant currency, commodities and fixed-income businesses. The results came even as banks such as Merrill Lynch and Citigroup reported big fixed-income losses, driven by writedowns on mortgages and mortgage-related securities. It also came as hedge funds run by Goldman’s asset management unit lost large amounts of money for their investors.
Goldman avoided most of the mortgage meltdown by making an early bet that riskier subprime mortgages would see a spike in defaults. Goldman shorted indices tied to subprime mortgages, bought credit default swaps on companies sensitive to mortgage problems and took other steps that allowed them to gain.
Goldman will report fourth-quarter earnings next month but has already said it does not expect to take any significant mortgage-
Executives at Goldman have always been sensitive to the perceptions of greed created by the vast sums they pay executives. The bank encourages its partners, the highest rank employees, to make significant charitable contributions.
When executives become partners at Goldman, they go through an orientation session in which they are encouraged not to make ostentatious displays of their great wealth.
Under the new fund announced on Wednesday, called Goldman Gives, participating partners will commit some of their overall compensation to charity. The fund will have individual accounts for participating partners who will help select worthy charities to receive money.
Goldman will cover costs of managing the fund.
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