Yesterday we broke the news that Goldman Sachs was considering making a huge charitable donation to deflect criticism over its bonuses. Today Andrew Ross Sorkin’s column reports on the merits and criticisms of this plan:
Now there’s talk inside Goldman that it is considering making a huge charitable donation — perhaps more than $1 billion — as a way to help deflect the criticism. Such a donation would be a welcome gesture that would no doubt benefit many needy organisations. But it would most likely be seen for what it is: a one-time move to draw attention away from where most of the money is really going. A large charitable donation also raises questions about the company’s fiduciary duty to its shareholders; it could be seen as giving away profits that ostensibly belong to them.
Sorkin also notes the irony of the Goldman bonus backlash. Although is set to pay enormous sums–tens of billions–in bonuses at the end of the year, most of that will be in precisely the kind of compensation that regulators are demanding.
Goldman’s executives are paid mostly in stock, which vests over three years starting at the end of the next year, so it is more like a four-year period. Excluding the eye-popping bonus numbers, no Goldman Sachs executive made more than $225,000 in cash last year. Mr. Blankfein and the rest of his management team, in deference to popular opinion at the time, waived their compensation completely.
So even though many of Goldman’s executives may make tens of millions of dollars, it is only on paper so far. And Goldman may impose a clawback provision that would require employees to give up some of their compensation if trades go the wrong way, similar to ones that Morgan Stanley and several others have already proposed…
The American Securitization Forum, another lobbying association, is seeking a six-month delay in any change to capital requirements, or at least a phase-in period.
“With any increase in required capital, a banking institution is likely to reduce the amount of lending using such securitization vehicles, as well as other lending,” the American Bankers Association wrote in a letter to regulators. The association, the nation’s biggest banking lobby, suggested that any transition period should be three years at least, with no change in regulatory capital impact in the first year.