Lloyd Blankfein calls for clawbacks and ban on multi-year bonuses
Goldman Sachs chairman Lloyd Blankfein has launched an astonishing attack on the investment banking industry.
By James Quinn, US Business Editor
Telegraph, 09 Sep 2009
Mr Blankfein, who has taken home $176.3m (£106m) in pay and compensation over the last five years, called for multi-year guaranteed bonuses to be banned throughout the banking industry and for the widespread introduction of clawbacks to recoup bonuses from loss-making bankers.
The banker added that much of the recent "controversy and anger" over the size of bankers pay is "understandable and appropriate".
In a strident speech made at a Handelsblatt banking conference in Frankfurt, the head of the investment bank went further than he has before in calling for multi-year contracts to be banned.
He had previously said only that they should be "avoided entirely".
It is understood that rather than wanting some form of regulatory veto being imposed on multi-year contracts, Mr Blankfein believes that the compensation committees of major banks should work together to ensure that they are not allowed.
His comments build on Goldman's compensation principles, which he outlined in detail at the bank's annual general meeting in May, and focus on long-term rewards for long-term service, calling on the bank's 29,400 staff to "think and act like long-term shareholders".
In his Handelsblatt speech, Mr Blankfein admitted that there is "little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year," a reference to rivals including Merrill Lynch and Citigroup, which have continued to pay bonuses in spite of each racking up tens of billions of dollars of losses last year.
He instead argued that the percentage of compensation awarded in shares should increase as a banker's total compensation increases, and that for senior people shares should be deferred.
The Goldman chief also called for the need for banks to claw back past compensation "so as to avoid excessive risk-taking".
However, Mr Blankfein stopped short of agreeing with calls for a cap on bonuses altogether, saying "we should resist a response that is solely designed around protecting us from the 100-year storm", adding that "taking risk completely out of the system will be at the cost of economic growth".
The scheduled speech is part of a calculated attempt by Mr Blankfein to ensure his point of view is heard ahead of the G20 summit later this month, at which leaders of the world's largest 20 countries are set to discuss a global crackdown on banker's bonuses.
Mr Blankfein is understood to be of the opinion that bankers should not be apologetic for their compensation, but should be helping to shape the legislative debate to ensure future reforms are workable.