Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd C. Blankfein’s $19 million compensation for 2010, almost double the prior year, ended two years in which the firm’s top executives gave up cash bonuses.
Blankfein’s pay included $5.4 million in cash, $12.6 million in restricted stock, a $600,000 salary and about $464,000 in other benefits, a proxy statement from the New York-based firm showed. Blankfein’s $9.8 million pay for 2009 included $9 million in restricted stock plus salary and other compensation.
Cash awards are back at Goldman Sachs, the fifth-biggest U.S. bank by assets, after a 38 percent drop in annual earnings and a year in which the stock price ended close to where it began. While pay is up from 2008, when Blankfein, 56, and six other senior officers got no bonuses, it remains below Blankfein’s record-setting $67.9 million award for 2007.
“The fact that they would return to a more market-based pay is probably not surprising” after 2008 and 2009, said Rose Marie Orens, a senior partner at Compensation Advisory Partners LLC in New York. “They’re not quite back to anything remotely like what they paid in the prior years.”
Goldman Sachs’s 2010 share performance -- a decline of less than half of 1 percent -- outstripped competitors including Bank of America Corp. and Morgan Stanley, which was the second-biggest U.S. securities firm after Goldman Sachs before both converted to banks in 2008. Shares of JPMorgan Chase & Co., which reported a record profit last year, rose 1.8 percent during the year.
‘Difficult Market Conditions’
“While our performance in 2010 was not as strong as in 2009 due to difficult market conditions for much of the year, we continued to create value for our shareholders and prudently manage our firm from a risk perspective,” Goldman Sachs said in the proxy.
All 30 members of the management committee received only restricted stock for their 2009 bonuses and four of them --Chief Financial Officer David A. Viniar, 55, President and Chief Operating Officer Gary D. Cohn, 50, and Vice Chairmen J. Michael Evans, 53, and John S. Weinberg, 54 -- received the same $9 million award as Blankfein.
For 2010, Goldman Sachs once again matched those four executives’ bonuses to Blankfein’s $12.6 million in restricted stock and $5.4 million in cash. All four also received a $600,000 salary in 2010.
“They’ve had a history of paying their top five like partners,” Orens said. “It’s unusual, but it really comes from their partnership mentality.”
The firm disclosed in January that Blankfein’s salary will increase to $2 million in 2011 and that Cohn, Viniar, Evans and Weinberg will each receive a $1.85 million salary starting this year. Each of them had received a $600,000 salary since 1999, the year the firm became a public company.
Blankfein and eight deputies reaped a total of $125 million during 2010 from their investments in private equity and hedge funds managed by the firm, the proxy disclosed. Blankfein’s payments, which included profits and any return of capital, totaled $27.2 million, outstripping his compensation.
After Blankfein, the largest fund distributions were $23.3 million to General Counsel Gregory K. Palm; $20.2 million to Cohn; $16.7 million to Viniar; and $13.7 million to Evans. The others disclosed in the filing were $10.9 million to Vice Chairman Michael S. Sherwood; $6.4 million apiece to Weinberg and General Counsel Esta E. Stecher, and $430,000 to Alan M. Cohen, global head of compliance.
Goldman Sachs’s executives stand to earn more cash bonuses in future years under a long-term incentive plan, the LTIP, disclosed in the proxy. The payments are contingent on two financial measures: return on equity and book value per share.
The initial measurement period is three years and the board can extend it through the end of 2018. The notional value of the award for all five executives named in the proxy was $7 million, a figure that wasn’t included in the 2010 compensation because it won’t be delivered for three years.
For the executives to receive the awards in full, return on equity, or ROE, must average 10 percent and book value per share must rise an average of 7 percent, the proxy shows. They will receive 150 percent of the bonus if the average ROE is 15 percent or more and book value per share climbs an average of 12 percent or more. The ROE target is below the firm’s long-stated goal of achieving 20 percent return on tangible equity, which equates to more than 15 percent ROE, over the economic cycle.
Eleanor Bloxham, president of the Corporate Governance Alliance in Columbus, Ohio, said Goldman Sachs seemed to be responding to regulators’ efforts to align pay to the firm’s longer-term performance.
‘Paying out Cash’
“Going forward I’m pleased that the LTIP cash will include these deferral mechanisms so that it doesn’t encourage risk-taking and that risk measures look at longer-term horizons,” she said. “There’s still a way to go in this year’s plan because they’re paying out cash.”
To be sure, all of the executives own company stock worth hundreds of millions of dollars. Blankfein owned 3.29 million shares as of March 7, the proxy disclosed, worth $527.6 million at the $160.23 share price on April 1. Cohn’s 1.96 million shares were worth $313.4 million and Viniar’s 1.89 million shares were worth $302.4 million.
The SEC requires that the company’s proxy disclose how much compensation executives received during the fiscal year. Under that methodology, which includes awards received during 2010 for performance in prior years, Blankfein received a total of $14.1 million in compensation.
Goldman Sachs’s board has unanimously recommended that the firm give shareholders a non-binding advisory vote on executive compensation every year.
The firm is set to hold its annual shareholder meeting at 9:30 a.m. on May 6 in Jersey City, New Jersey.