Blankfein Opposed Raising Salaries Months Before His Tripled

Goldman Sachs Group Inc. CEO Lloyd Blankfein
Lloyd Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc. Photographer: Joshua Roberts/Bloomberg

Lloyd Blankfein, Goldman Sachs Group Inc.’s chairman and chief executive officer, warned against raising base salaries on Wall Street less than eight months before his own more than tripled to $2 million.

Goldman Sachs prefers paying compensation in bonuses that are contingent on the firm’s performance, rather than offering guarantees or high salaries, Blankfein said in a June 16 interview with staff of the Financial Crisis Inquiry Commission, a recording of which was made public this month. On Jan. 28, the New York-based firm disclosed it had raised salaries for Blankfein and four other top executives that had been $600,000.

“Salary is another form of guarantee, so we would like low salaries and high contingent comp,” Blankfein said in the interview. “We think the world is going in a poor direction. We think having high fixed salaries for people, or guarantees for people and lower contingent comp actually is worse behavior.”

Goldman Sachs raised salaries after competitors including Morgan Stanley, UBS AG and Citigroup Inc. lifted base pay for employees and executives. New U.S. rules on bank pay, approved for public comment by the Federal Deposit Insurance Corp. on Feb. 7, aim only at bonuses and leave salaries untouched.

Stephen Cohen, a spokesman for the company, declined to comment on Blankfein’s remarks and the subsequent pay decision.

‘Same for 20 Years’

Blankfein, who said in the June interview that “my salary’s been the same for 20 years,” was awarded a $12.6 million stock bonus for 2010 in addition to the salary upgrade, according to company filings on Jan. 28. The filings don’t show any cash bonus that he might have received, which won’t be public until the firm files a shareholder proxy in a few weeks.

On Jan. 28, the firm also disclosed that it raised base salaries for Chief Financial Officer David Viniar, President Gary Cohn, and Vice Chairmen J. Michael Evans and John S. Weinberg to $1.85 million each from $600,000 previously.

Goldman Sachs set a Wall Street pay record in 2007 when it awarded Blankfein a $67.9 million bonus comprised of $26.8 million in cash and $41.1 million in restricted stock and options.

Since 2000, Blankfein, 56, has received more than $125 million in cash bonuses on top of his salary and stock awards, company filings show. As of March 8, 2010, Blankfein owned 3.37 million shares of Goldman Sachs stock, according to last year’s proxy filing. That would be worth $549 million at yesterday’s closing price of $162.94.

Blankfein said in the June interview that he was opposed to a rule imposed by the Financial Services Authority in London limiting how much of employees’ total compensation could be paid as a bonus.

‘Out of Whack’

“If we could do it, we would have their bonus be 100 percent of their comp,” Blankfein said. “And so we do something different in London than we do here. We regard that as subversion of our process. We don’t do that here, but we do it there.”

Alan Johnson, president and founder of compensation consulting firm Johnson Associates Inc. in New York, said he has long advocated higher salaries on Wall Street.

“On Wall Street, many of these firms hadn’t increased salaries in 10 years or longer, so they were out of whack,” Johnson said in an interview.

Still, he said he worried that regulatory efforts to restrict bonus payments may lead Wall Street firms to go too far in raising base salaries.

“We may have a second and third wave of salary increases, which will be detrimental, which will raise fixed costs, will reduce the incentives for people to perform,” Johnson said. “The first wave I think was long overdue.”


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