Goldman and Morgan Stanley CEO pay docked

The chief executives of Goldman Sachs and Morgan Stanley have had their pay docked, after a year in which both banks’ profits sank in choppy markets and Goldman was hit by a record fine.

Figures released by Goldman on Friday afternoon showed that Lloyd Blankfein, chairman and chief executive, was paid $23m for 2015, down from $24m in 2014, marking the first drop in four years.

At the same time, James Gorman, chairman and chief executive at Morgan Stanley, saw total pay drop from $22.5m in 2014 to $21m last year, according to a person familiar with the arrangement.

Other senior executives at Goldman took a similar sized cut. Gary Cohn, chief operating officer, and Harvey Schwartz, chief financial officer — leading candidates to succeed Mr Blankfein — each had their packages cut by $1m to $21m.

The smaller awards are in keeping with a culture of pay-for-performance at Goldman, which has made great play of its efforts to align returns to shareholders with rewards to staff. The bank’s return on equity dropped to 7.4 per cent last year, down from 11.2 per cent, knocked by a $5.1bn settlement over mis-selling mortgage-backed securities in the run-up to the financial crisis.

The pay cut for Mr Gorman, meanwhile, came after the bank missed a couple of the strategic goals he had set out. The bank’s shares sank almost a fifth over the year while its return on equity was 7 per cent — better than the 5 per cent posted in 2014 but well short of the bank’s 10 per cent target over “the medium-term.” A lacklustre performance from the bank’s bond-trading unit was the main culprit.

The disclosures came a day after JPMorgan Chase said that Jamie Dimon, its chairman and chief executive, would enjoy a leap in his total award for 2015 by more than a third to $27m, after a year of record profits. But JPMorgan, the biggest US bank by assets, noted that the non-cash component of Mr Dimon’s pay would increase, and that the stock would be granted in the form of performance share units, with profit hurdles attached. Both were new measures, taken after record numbers of shareholders took issue with the bank’s pay plan at the annual meeting last year.

Goldman’s total pay pool in 2015 was flat from the year before, at $12.7bn, despite an 8 per cent rise in employees. Staff learnt of their final bonuses on Wednesday, as the bank presented its fourth-quarter figures.

On Friday the bank announced that the equity component of Mr Blankfein’s bonus was worth $14.7m. A person familiar with the award said that Goldman applied a ratio of 70 per cent equity, 30 per cash in calculating variable pay; giving a cash component of $6.3m and a total pot of $21m. He also received a base salary of $2m, unchanged from last year.

The total excludes an award under a long-term incentive plan, which is disclosed later in the year.

Last year that was worth $7m, making Mr Blankfein comfortably the best-paid among his peers.

In September, Mr Blankfein, 61, revealed that he was suffering from a “highly curable” form of cancer, and would soon begin chemotherapy. He then tapered his duties, dropping to three or four days a week while continuing to represent Goldman at events in the US.

He completed his treatment early in the new year, but elected to stay at home this week rather than make his usual trip to Davos.