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Goldman Sachs amends pay practices to stifle criticism

December 10, 2009 | 10:40 am

Bonuses aren’t dropping at Goldman Sachs Group Inc., but the company is adjusting its compensation practices to stifle criticism of its famously gold-plated paydays.

The powerhouse investment bank announced this morning that its top 30 executives would receive their entire 2009 bonuses in stock rather than a combination of cash and stock that has long been common on Wall Street. Employees are barred from selling the shares for five years.

And Goldman is instituting new rules that would allow the New York company to reclaim the shares if its earnings falter in coming years. The goal is to show that traders and bankers are paid according to the company's long-term health -- and by extension, the overall U.S. economy -- rather than to excessive risk-taking that plumps short-term earnings but backfires in coming years.

Blankfeinl “Enhancing our recapture provision is intended to ensure that our employees are accountable for the future impact of their decisions, to reinforce the importance of risk controls to the firm and to make clear that our compensation practices do not reward taking excessive risk,” Goldman said in a statement.

Goldman stock was up 62 cents to $167.06 at about 10:30 a.m. PST. The stock has surged 99% year to date after diving 61% last year.

Goldman also announced that it would let shareholders vote on executive compensation at its next annual meeting. So-called say-on-pay votes allow shareholders to express opposition to a company’s payouts. But the votes are non-binding, and managers are free to ignore the outcome and pay themselves whatever they’d like.

Still, companies have been loath to cede any ground in the years-long compensation tussle, and Goldman’s announcement demonstrates the pressure on the company amid high unemployment and general suffering of many Americans.     

-- Walter Hamilton

Photo: Goldman CEO Lloyd Blankfein. Credit: Saul Loeb / AFP/Getty Images