Goldman Sachs on Wednesay began celebrating confirmation of bumper bonuses for this year, with the chairman and chief executive, Lloyd Blankfein, expected to lead the pack with a 30 per cent increase in his pay to about $70m.
The figures for Goldman came as Lehman Brothers said it would award Dick Fuld, chief executive, $41m worth of restricted stock as part of his 2007 compensation. In total, Mr Fuld stands to earn more than $50m for last year when cash bonus and other payments are disclosed next year.
Both Lehman and Goldman have come through the credit squeeze in far better shape than some of their competitors, as successful hedging strategies offset losses on mortgage-related securities. However, the success of the firms, and the large compensation awarded to their chief executives, could spark further scrutiny of their activities during the rapid expansion in the sale of mortgage-related securities.
Goldman's accrued compensation pot - the money designated for both base salaries and bonuses - at the end of the third quarter was almost $17bn, and is estimated to have ended the bank's financial year at close to $20bn. That is to be divided among Goldman's 29,000 full-time employees, as well as almost as many full-time staff not on the official payroll, implying a pay-out on average of roughly $360,000 per head.
Insiders said Goldman's impressive performance this year, including a 32 per cent rise in return on equity over the first three quarters, could justify Mr Blankfein receiving an approximate 30 per cent increase from the $54m pay-out he received last year. Goldman's shares are up 9 per cent this year while its rivals have seen their shares plunge. Mr Blankfein's final remuneration has yet to be set by the bank's compensation committee.
Goldman expects to inform all staff of their bonuses by the end of this week. It has been an especially good year for Goldman's mergers and acquisitions franchise, and fixed-income, currencies and commodities.
Many were celebrating Wednesday. "Are people happy? I think broadly yes. The message was that in a year when the firm has done well, it pays its people well," said a delighted banker. The bank's largesse with its staff will set an uncomfortable and expensive precedent as rival investment banks seek to retain their best performers ahead of what is expected to be a tougher market for the industry next year.
Goldman recently moved to promote philanthropy among its top staff by facilitating automatic donations to a charitable fund managed by the company.
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