Goldman Sachs Group Inc., weighing 2010 pay packages for a year that could rank as Wall Street’s second best, said it may grant bonuses that depend on future earnings, in addition to stock performance.
The awards would go to “key employees” and be tied to a variety of financial measures including revenue, net income and return on equity, a gauge of profitability, the New York-based company said yesterday in a regulatory filing. Awards may consist of cash, securities or other equity-linked components, and carry provisions allowing their cancellation or return.
The plan “is a tool the compensation committee may use to further align incentive compensation with long-term performance,” said Stephen Cohen, a company spokesman. Cohen declined to provide figures on potential payouts, saying that awards haven’t been set.
Regulators have pushed banks to design pay packages for top employees that would discourage excessive risk-taking, after a financial crisis wiped out firms including Lehman Brothers Holdings Inc. and led to government bailouts. Most firms have interpreted the guidance to emphasize deferred stock awards over cash bonuses.
Goldman Sachs’s new program aims to ensure “that the firm’s incentive-compensation structure is balanced and consistent with the safety and soundness of the firm,” according to the filing. It won’t fuel “imprudent risk-taking,” it said.
Recipients will be selected by the board’s compensation committee, according to the filing, which didn’t specify eligible executives.
The payouts may be halted or reclaimed if the firm determines, for example, that an employee engaged in “materially improper risk analysis or failed sufficiently to raise concerns about risks,” according to the filing. Previous awards have also included so-called recapture provisions.
The new plan, adopted by the compensation committee Dec. 17, was disclosed after the close of New York markets yesterday, the last trading session before Christmas.
Goldman Sachs and the four other largest U.S. firms by investment-banking and trading revenue -- JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Morgan Stanley -- are set to complete their best two years in investment banking and trading. They will likely have a better fourth quarter than the previous two periods, driven by equity underwriting and higher volume in stock and bond trading, according to data compiled by Bloomberg. Even if the quarter only matches the third, their revenue will top that of any year except 2009.