Top executives of Goldman will receive millionaire incentive

(Bloomberg) — The top 1% of Goldman Sachs Group Inc.’s top executives will receive a one-time special incentive on top of annual bonuses, a nod to the Wall Street titan’s resounding success during the pandemic.

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The unusual payments to partners — the roughly 400 executives who make up the top echelon of the investment bank — will add millions of dollars to many compensation packages, according to people with knowledge of the matter, who asked not to be identified discussing internal decisions. That group is already in line for larger payouts ranging from a few million dollars to multiples of that after a year of record earnings.

Goldman management, under pressure to defend against increasingly aggressive poaching on Wall Street, sees the additional incentives as a creative solution that will come with a warning: Recipients should not confuse the incentives with a new salary floor, two said. of people. When compensation is set next year, managers will ignore one-time payments when making comparisons.

That allows Goldman’s leaders to tap into the bank’s wealth from 2021 to reward its most prized employees, while trying to temper expectations — and costs — going forward.

A Goldman representative declined to comment.

Wall Street bosses are improving compensation this year, after showing restraint in the first half of a two-year pandemic-spurred stock market and M&A boom. At the end of 2020, they were wary of appearing extravagant amid the Covid-19 outbreaks and weren’t sure the boom would last. Now, they feel pressure to open their wallets to keep top producers happy and prevent them from jumping ship.

Goldman’s title of partner is a holdover from its 130-year history as a private company, when its leaders contributed their own capital to fund deals and transactions. In the modern Goldman, the partner title still has a symbolic value and indicates his highest position in the hierarchy of the company.

The executives, many of whom lead teams across the company’s operations, typically receive a base salary of about $1 million that is typically dwarfed by year-end cash and stock bonuses. Over the past decade, the compensation gap between members and rank-and-file CEOs had been narrowing in an attempt to control costs.

But the onset of the pandemic and the ensuing disruptions and opportunities in the markets have given Goldman’s core equity trading and M&A operations a unique boost. Those successes helped the company post near-record revenue in 2020, and surpass that mark in just the first nine months of 2021.

The new incentive recalls another time in Goldman’s past when the company looked for ways to keep its partners happy. In late 2008, after revenue fell more than 50%, the bank’s leaders gave out options that would increase its value if the stock rebounded.

Those millions of options were intended to calm executives upset about the pay cuts that year. Its value rose sharply over the next decade, with holders reaping more than $3 billion as the stock rallied and soared.