Goldman Sachs Denies Bonuses for 100 Investment Bankers

  • Number of dealmakers passed over for rewards is said to grow
  • On Wall Street, getting ‘blanked’ is often a signal to quit

Goldman Sachs Group Inc. didn’t pay 2016 bonuses to about 100 bankers who advise on takeovers and underwrite securities offerings, signaling to a bigger crowd of underperformers that they’re probably better off elsewhere, according to people with knowledge of the matter.

The move is more draconian than in past years when many dealmakers who failed to impress their bosses still got something, said the people, who asked not to be identified discussing the firm’s compensation practices. The number of employees denied a bonus in recent weeks is higher than a year ago -- eliminating what’s typically a major component of their pay.

For bankers and traders at a well-capitalized and profitable firm, getting no bonus is a dreaded scarlet letter -- usually a strong hint that they’re no longer wanted and should start hunting for another job. Around the industry, it’s known as getting “blanked,” or receiving a “goose egg,” a “bagel” or a “doughnut.”

It’s all part of a Wall Street compensation model that distills an individual’s performance into a single number at year-end. Many employees spend the intervening months trying to calculate how their business is faring, and how much they’re contributing, in anticipation of a bonus that can sustain an expensive lifestyle, build wealth or even pay for a house.

Read more on the firm’s personnel practices: The Goldman way to fire

Goldman Sachs typically places staff into one of five performance tiers, known as quintiles, during its annual performance reviews. Members of the lowest quintile, the bottom 20 percent, missed a bonus this year -- though most were spared, the people said.

Management determined it needed to reward top performers, and took bonuses away from less productive workers to control overall compensation costs, two people said. The bank’s compensation ratio, which compares pay to revenue, rose to 38.1 percent for 2016 from 37.5 percent in the prior year.

A spokesman for the company declined to comment on bonuses.

The bank’s dealmakers, led by John Waldron and Richard Gnodde, had a mixed year. The New York-based firm remained the No. 1 global merger adviser in 2016, even as investment-banking revenue tumbled 11 percent to $6.27 billion. That was a sharper drop than at some rivals. At JPMorgan Chase & Co. it slipped 6.7 percent.

Goldman Sachs also denied bonuses to some employees in the securities division, run by Isabelle Ealet, Pablo Salame and Ashok Varadhan, though the number affected was more in line with previous years, one of the people said. The fixed-income business in that unit has already seen broad job cuts, and client activity there improved in the second half of the year.