The Abyss: Blankfein and others like him are in positions to know that they are standing at the brink of 1929-1933 and the word in the highest echelons of greed is
"Take the Money and Run!
- Les Blough, Editor
Three articles from CNN Money
Goldman's Blankfein collects $68M bonus
Payday in restricted stock, options and cash marks biggest ever for Wall Street CEO
By David Ellis, CNNMoney.com staff writer
December 21 2007
NEW YORK (CNNMoney.com) -- Goldman Sachs Chairman and CEO Lloyd Blankfein will take home nearly $68 million in restricted stock, options and cash, making it the largest bonus ever given to a Wall Street CEO.
Blankfein was awarded $26.8 million in cash and $41.1 million in restricted stock and stock options, according to a company filing with the Securities and Exchange Commission issued Friday.
With this year's bonus, Blankfein shatters the record he set a year ago, when he was awarded $54 million.
News reports had originally projected that Blankfein will take home as much as $70 million, after helping to lead the company through this summer's market meltdown and the ongoing credit crisis.
Unlike some of its rivals, which have witnessed billions of dollars evaporate from their balance sheets, Goldman Sachs has proved unshakable. Just this week, the company reported better-than-expected fourth-quarter earnings, while peers like Morgan Stanley and Bear Stearns recorded steep losses.
As it stands right now, Blankfein will be among the few Wall Street CEOs to collect a bonus this year. After this week's dismal results, Morgan Stanley (MS, Fortune 500) Chairman and CEO John Mack and Bear Stearns (BSC, Fortune 500) chief James Cayne both announced they would forsake their 2007 bonuses.
While bonuses are common throughout corporate America, they are a far bigger part of overall compensation for all levels of employee pay on Wall Street than they are at a typical corporation.
Tom McMullen of the Hay Group, a human resources and management consultant, estimates that cash bonuses typically equal between 40 and 100 percent of base salary for top executives on Wall Street, while senior managers receive between 15 to 30 percent of base pay as bonus payments. Even entry-level employees might see 10 to 20 percent of their base pay in the form of a bonus.
This year was expected to be a difficult one for finance pros given the recent market turmoil and the ongoing credit crisis. Overall, financial firms were expected to cut bonuses up to 10 percent from a year ago, according to industry projections.
A year ago, bonuses on Wall Street reached a record $23.9 billion, averaging more than $136,000 per employee, according to the New York State Comptroller's office.
Facing the biggest bonus squeeze were those individuals working in mortgage-related areas, with their bonuses declining by as much as 50 percent from a year ago, according to a report published last month by the compensation research firm Options Group.
Even though dealmaking has slowed considerably on Wall Street, investment bankers are still expected to enjoy a bump in their annual bonus from a year ago given the frenetic pace of merger-and-acquisition activity in the first half of 2007.
With so many banks underperforming, many financial firms were widely expected this bonus season to shift from cash to stock in an effort to compensate employees while retaining talent. Some firms have already said they would cap their cash compensation, including UBS, which announced a limit of $750,000 for its workers.
Goldman Sachs (GS, Fortune 500) stock finished more than 3 percent higher in Friday trade.
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| Bear Stearns CEO James Cayne, left, will go without the bonus this year ... while Goldman Sachs CEO Lloyd Blankfein is expected to take home a record bonus of about $70 million. James Cayne ranks 354 on The 400 Richest Americans 2006. Cayne's "Net Worth" is $1.1 billion (Source: Bear Stearns Companies). Blankfein's "net worth" is difficult to find on the internet. |
Your bonus is safe, your boss' isn't
Bear Stearns' James Cayne and Morgan Stanley's John Mack aren't getting them, but Wall Street bonuses aren't disappearing.
By Chris Isidore, CNNMoney.com senior writer
December 20 2007
Bear Stearns CEO James Cayne, left, will go without the bonus this year that accounted for most of his compensation this year, while Goldman Sachs CEO Lloyd Blankfein is expected to take home a record bonus of about $70 million.
Andy Serwer explains why this truly is the most wonderful time of the year for some who work on Wall St.
NEW YORK (CNNMoney.com) -- John Mack isn't getting one this year. Neither is James Cayne.
But the subprime mess and the red ink it spilled throughout the canyons of Wall Street hasn't washed away the bonuses that are staples of compensation packages at financial services firms.
In fact, the New York State Comptroller's office forecasts that the overall bonus pool will drop no more than 10 percent from the record level of $23.9 billion in 2006, despite an estimated drop in investment bank earnings of about 24 percent, according to earnings tracker Thomson First Call.
For most professionals up and down Wall Street, a difficult 2007 will end with a bonus check - perhaps smaller than a year ago - but lucrative nonetheless.
Helping to keep the bonus pool strong is Goldman Sachs (GS, Fortune 500), which has largely escaped the hit to its earnings from the subprime mortgage securities losses being reported by its rivals.
The firm reported the total of both employee salaries and bonuses rose 23 percent this year to $20.2 billion. CEO Lloyd Blankfein reportedly is in line for a $70 million bonus, which would best the previous record bonus of $54 million he received in 2006.
But other top firms haven't done as well as Goldman, with Morgan Stanley (MS, Fortune 500) and Bear Stearns (BSC, Fortune 500) both reporting their first quarterly loss in those fabled firms' histories this week. Citigroup (C, Fortune 500) and Merrill Lynch (MER, Fortune 500) are expected to report large losses when they report their fourth-quarter results early next year. Larger than expected writedowns already caused both those firms to replace their chief executives.
Morgan Stanley CEO Mack and Bear Stearns CEO Cayne were able to hang onto their jobs, but both firms announced they would go without bonuses this year - components which are central to both men's compensation packages. The Bear Stearns executive committee is also going without bonuses.
Bad news at Bear Stearns
"We designed our executive compensation programs to pay for performance," said a Bear Stearns statement explaining the zero bonus for its top executives. "In a year in which we produced unacceptable results, the plans are working as they were designed."
Mack received no cash bonus a year ago, but received stock and options worth an estimated $40.2 million, which was 50 times greater than his $800,000 base pay.
Cayne received a bonus of $33,600,000 in 2006, which dwarfed his base pay of $250,000.
Compensation experts say it's smart for those executives to have scrapped their bonuses, especially since most of the professionals at those firms will be taking home smaller bonuses this year.
"I think it's a good gesture, both for the shareholders and the professionals who work for them," said to Options Group Director Eric Moskowitz. "No bonus is a real sign these guys want to make things right and sending a signal that they're not satisfied with results."
But going without a bonus will likely be limited to a relatively small group of top executives at the firms.
"The closer you are to Mack or Cayne, the bigger the haircut you just took," said Brent Longnecker, chief executive of Longnecker & Associates, a corporate compensation associate.
The compensation experts say that even in the divisions within the investment banks that ran up large losses, such as fixed income, there will be bonuses for top producers, even if those employees will be taking home quite a bit less this year.
Goldman's $20 billion payday
"They'll make sure they've got a retention bonus plan in place," said Longnecker, who said the managers at the firm realize these employees stopped losses from being worse than they were.
"These top performers can get an attraction bonus real quick if they go someplace else," said Longnecker.
The experts say one reason for the top executives to give up their bonus payments this year is to have more money to spread around and pay to top performers.
At the firms that took a big subprime hit, almost no one will escape some cut in bonus payments this year, even if their own performance, or the profits from their division, outperformed targets, according to Longnecker.
While bonuses are common throughout corporate America, they are a far bigger part of overall compensation for all levels of employee pay on Wall Street than they are at a typical corporation.
Tom McMullen of the Hay Group, a human resources and management consultant, estimates that cash bonuses typically equal between 40 and 100 percent of base salary for top executives on Wall Street, while senior managers receive between 15 to 30 percent of base pay as bonus payments. Even entry-level employees might see 10 to 20 percent of their base pay in the form of a bonus.
Banks saving for a rainy day
Longnecker said he believes management at both Morgan Stanley and Bear Stearns made the decision to forgo bonuses, without it being pushed on them by the compensation committees of the firms' boards, although he added, "The compensation committee probably feels relieved they did so."
And he said that as much as Mack and Cayne saw their bonuses reduced, it was limited compared to the huge declines in their net worth this year from the drop in the value of their stock and options.
Both firms are off nearly 50 percent from their highs of earlier this year, a drop that cost Mack about $146 million off the value of his stock and options since July, and cost Cayne a whopping $571 million in the value of his holdings since February. Still that leaves Mack with $177 million in Morgan Stanley stock and options, and Cayne with about $617 million in Bear Stearns shares and options.
"They're in good positions to forgo a bonus," said Longnecker.
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