Goldman Tries Radical Idea Of Using Bonuses To Reward Long-Term Value

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Goldman Sachs will be giving out some bonuses based on future earnings and stock performance in an effort to dissuade excessive risk-taking by its bankers, Bloomberg reported

The new program aims to incentivise performance while simultaneously deterring risky bets, and would be tied to measures including revenue, net income and return on equity.

And importantly, these awards could be revoked – there are clauses that allow for the packages to be cancelled or returned if an employee didn’t carry out proper risk analysis or didn’t warn of severe risks associated with an investment or deal.

These bonuses could be paid out in cash, securities or other equity-linked components.

From Bloomberg,

The plan “is a tool the compensation committee may use to further align incentive compensation with long-term performance,” said Stephen Cohen, a company spokesman.

Goldman Sachs’s new program aims to ensure “that the firm’s incentive-compensation structure is balanced and consistent with the safety and soundness of the firm”… It won’t fuel “imprudent risk- taking.”

More at Bloomberg >

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