Goldman Sachs’s Cohn Takes Pay Lead Among CEO's Deputies
Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, has started differentiating among Lloyd C. Blankfein’s top deputies again after four years of granting lockstep pay awards.
President Gary Cohn, 52, was awarded a $19 million compensation package, 12 percent more than Vice Chairmen J. Michael Evans and John S. Weinberg, the New York-based firm said in an annual proxy. The disparity is the first since 2007, when Blankfein’s bonus set the record for a Wall Street chief executive officer.
Cohn’s pay may fuel speculation about which executive will succeed Blankfein, 58, who sometimes out-earned his own boss Henry Paulson. Blankfein, who succeeded Paulson as chairman and CEO in June 2006, said in a February interview with Bloomberg Television that he has no immediate plans to depart.
“If somebody gets more money, that could be a sign” that they’re in the lead to succeed Blankfein, said Jeanne Branthover, managing director at Boyden Global Executive Search in New York. “If somebody gets less money it’s not a good thing, because they’ve been equals.”
Evans, 55, the vice chairman who oversees the emerging- markets business, received $17 million, as did Weinberg, 56, a co-head of investment banking. David A. Viniar, chief financial officer until the end of January, was awarded $19 million. The firm didn’t disclose 2012 pay for Harvey M. Schwartz, who replaced Viniar as CFO.
Differences in pay among the named executive officers, or NEOs, were “primarily to reflect their individual performance, as well as their roles,” the bank said in the filing. “No specific individual performance goals were used by the committee in making these NEO compensation determinations.”
Blankfein, 58, also received a larger bonus than his deputies for the first time since 2007. None of Goldman Sachs’s named executives was awarded a bonus for 2008, and each of them got cash and stock awards of $9 million, $18 million and $10 million over the next three years.
Blankfein’s $21 million award for 2012 was his highest since 2007, as reported by Bloomberg News in January. It included $13.3 million in restricted stock and a $5.7 million cash bonus for 2012 in addition to his $2 million salary, according to the filing.
That made him the highest-paid CEO among those at the 10 largest U.S. banks, exceeding the $9.75 million for Morgan Stanley (MS)’s James Gorman and $11.5 million awarded to JPMorgan Chase & Co. (JPM)’s Jamie Dimon.
Cohn’s and Viniar’s packages for 2012 each included a $5.15 million cash bonus, while Evans and Weinberg each got a $4.55 million cash award.
Pay is higher for all executives if long-term incentive plan awards are included. The plan will pay $5 million in cash bonuses to Blankfein and Cohn, and $4 million to Evans and Weinberg in three years if the firm meets certain targets. The same rules apply to last year’s $3 million long-term incentive and $7 million in 2011, when the plan started.
The cash bonuses shrink or grow depending on whether the firm achieves a 10 percent average return on equity and 7 percent average increase in book value per share. The board’s compensation committee, which has been led by former Fannie Mae CEO James A. Johnson as long as Goldman Sachs has been a public company, has the power to change the awards. The committee can give from zero to 150 percent of the amount due, the bank said.
While the Goldman Sachs awards are initially tied to three- year periods, the board can also opt to extend the measurement for a further five years. In December, the compensation committee set the performance period for the 2011 incentive pay to end in December 2018 instead of December 2013.
“The board’s ability to change the long-term incentive measures whenever it wants to, and with respect to any individual it singles out, makes the plan a joke because you can be sure the adjustments that are made will be to give an executive a better chance at getting the money,” said Erik Gordon, a professor at the University of Michigan’s law school and business school.
Top executives received payouts from funds managed by the firm during the year, including profits, return of money invested, and their portion of the funds’ management fees, known as overrides. Those payouts during 2012 totaled $31.2 million for Blankfein, $25.8 million for Cohn, $22.2 million for Viniar, $21.3 million for Evans, and $9.6 million for Weinberg, according to the proxy.
Other recipients of such fund distributions included Vice Chairman Michael S. Sherwood with $18.7 million; General Counsel Gregory K. Palm, with $29.7 million; and Chief of Staff John F. W. Rogers, with $9.9 million, the proxy showed.
Goldman Sachs reported its first revenue gain in three years in 2012. Return on equity, a measure of how well the bank reinvests shareholders’ money, rose to 10.7 percent from 3.7 percent in 2011. Still, it remained at less than one-third of its 2007 level.
The stock rose 41 percent in 2012, the first annual increase since doubling in 2009. While the shares have rallied 17 percent this year to close yesterday at $149.12, they’re still 11 percent below their level at the end of 2010.
Johnson, head of the compensation committee, was re-elected to the board with about 84 percent of the vote at last year’s shareholder meeting, overcoming opposition from investment firm Ruane, Cunniff & Goldfarb Inc.
Goldman’s board altered succession planning for top executives, which it used for Schwartz’s ascension to CFO, lead director James Schiro wrote in his inaugural letter to shareholders. The new framework is focused on making sure potential candidates have experience with the board and with many of the firm’s businesses.
“Our goal is always to be in a position to appoint our most senior executives from within our firm,” the board said in the annual proxy statement.
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