PROVIDENCE – Brown University President Ruth J. Simmons and her fellow Goldman Sachs Group Inc. board members face a tough debate in the coming months as they figure out the size of the annual bonuses bankers there will receive this year.
Goldman has become a lightning rod for criticism in recent months amid mounting public outrage over the cost of government bailouts for the financial sector and the quick return to profitability – and generous compensation – at major banks.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
By Emilio DiSpirito IV License Partner | Engel & Völkers Oceanside Leader | The DiSpirito…
Learn More
Simmons, who became a Goldman Sachs director in 2000, is a member of the board’s compensation committee, which decides how much to pay top Goldman executives, including Chief Executive Officer Lloyd C. Blankfein, in addition to making general policy recommendations. The committee met eight times in 2008, Securities & Exchange Commission filings show.
Goldman set aside 47 percent of its revenue for compensation and benefits through the third quarter, which would be enough to pay each of its employees more than $500,000 for the first nine months of the year, according to Bloomberg News.
Another member of the bank’s compensation committee, Harvard Business School professor William George, on Wednesday told Bloomberg the committee’s members “are going to take a very hard look” at how much Goldman pays its bankers.
“There is so much anger out there and I’m not quite sure how to ameliorate that, other than to moderate things and to recognize that Goldman and every other firm benefited from the actions of the Federal Reserve Board and the Treasury Department,” George said.
Simmons’ perspective on changing Goldman’s compensation practices remains unclear. A spokesman for the university did not immediately respond to a request for comment.
Simmons earned $323,539 last year for serving on Goldman’s board. As of March, she also owned 34,899 shares of Goldman’s common stock, which were worth $5.65 million at the close of the market Tuesday.
“There will clearly be bonuses paid this year, but I think one has to look at it in relation to the profits,” George said. “Wall Street historically has paid out a high percentage of its pre-compensation profits, but I think that’s being closely looked at right now.”
Goldman’s roughly 400 senior employees earn a base salary of $600,000 each. In 2008, the top five executives received their base salary plus benefits such as a 401(k) and a car and driver, but no bonus.
That reduced Blankfein’s total compensation to $1.11 million in 2008, a drop of 98 percent from the $70.32 million the compensation committee awarded him the year before.
“The fundamental principle of our firm’s compensation philosophy is that compensation should reflect our firm’s performance,” the bank said in its annual report earlier this year. “Our senior executives share in the upside when our results are strong, and are negatively impacted when times are difficult.”
I certainly think they should give HUGE bonuses to their faithful employees, Tim Geithner and Ben Bernanke. Allowing Goldman Sachs to borrow huge sums from the Fed at 0% interest so they can buy foreign bonds at 3-6% interest is a great source of sheer profit. And being given permission to borrow money at practically no interest from the GDIC was also a great coup for Goldman Scaghs, especially since they do not take deposits and do not make commercial loans. That’s why Geithner and Bernanke deserve the biggest Goldman Sachs bonuses.