Lloyd Blankfein’s salary raise is getting a lot of attention today because it tripled just months after he said in an interview with the staff of the FCIC that he doesn’t think people should be paid high cash salaries.
In case you missed it, here’s Lloyd Blankfein saying he doesn’t want anyone at Goldman getting paid cash salaries six months ago: “If we could do it, we would have their bonus be 100 per cent of their comp.”
And here’s Lloyd Blankfein in January getting his salary tripled from $600,000 to $2 million.
So basically what happened is, he tells everyone, Members of the board on the executive compensation committee, please don’t pay me any cash salary. I’m serious, I don’t want it.
And then they thought, why doesn’t he want cash? Does that mean he doesn’t want us? Let’s give him $2 million, he has to like that.
And like that, Bam! They triple his salary.
So what he’s really done is prove that reverse psychology, playing hard to get, or whatever you want to call it, works like a charm.
Seriously though, what Blankfein said in June isn’t really different from how the firm has acted, so we don’t see what all the fuss is about.
Bloomberg quotes him saying:
“Salary is another form of guarantee, so we would like low salaries and high contingent comp.”
“We think the world is going in a poor direction. We think having high fixed salaries for people, or guarantees for people and lower contingent comp actually is worse behaviour.”
A $2 million salary isn’t a “low salary” for most people, but it’s pretty low for someone on Wall Street, especially someone that’s as senior as Blankfein.
And Blankfein’s contingent comp is much higher than his $2 million guarantee, so Goldman is actually doing exactly what Blankfein suggested.
Also, it’s not like he asked for his salary to be tripled. After 20 years at $600,000, it was just about freaking time.
Although, it sounds like if Blankfein really got his way, he’d be paid zero cash and all stock bonus, and so would everyone at Goldman.
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