BREAKINGVIEWS – Goldman bonus delay raises puzzling questions

January 19, 2010

— The author is a Reuters Breakingviews columnist. The opinions expressed are his own —

By George Hay

LONDON, Jan 19 (Reuters Breakingviews) – Goldman Sachs is taking its time, but it’s not clear why. Employees at the investment bank are usually told their annual bonus a few days before full-year results. But even though shareholders will discover the total amount spent on compensation on results day this Thursday, staff must now wait until next week to hear their individual windfall.

Goldman’s own explanation for the delay is that the welter of new regulations in 2009 has caused some slippage in working out individual bonuses. The G20 guidelines and the UK’s 50 percent tax on payouts over 25,000 pounds mean banks have new shackles, while Goldman’s conversion to a bank holding company means its financial year ends in December instead of a month earlier.

Maybe that’s the full explanation. But Goldman is not usually known for inefficiency. That’s why other theories are also going around. One is that the UK’s Financial Services Authority has thrown a spanner in the works. But the FSA has known the broad outlines of what Goldman was planning since early November. What’s more, Goldman has denied a rift with the regulator — and people familiar with the FSA’s thinking are downplaying the idea too.

Of course, the bank may simply be trying to manage the story. As the most notoriously profitable bank on Wall Street, Goldman will be acutely aware that it will face brickbats whatever it pays. If bankers were told their bonuses now, individual packages could leak out and Thursday’s results could disappear under a barrage of public outrage.

But it is also possible that Goldman is feeling the heat.

JPMorgan’s decision to pay out a low 33 percent of net revenues in compensation — and Goldman chief executive Lloyd Blankfein’s rough handling by the U.S. Congress last week — ramp up the pressure to pay out more modest bonuses than they were previously planning. Thursday’s results will help resolve the puzzle. But even then, it won’t be possible to know for sure whether Goldman has blinked.


— Goldman Sachs will not tell its employees their bonuses for the 2009 financial year until the end of the month, a change from the investment bank’s usual policy of informing staff a few days before announcing annual results.

— A spokesperson from Goldman said that the delay was a result of changing its accounting year end from November to December — and the raft of new rules concerning compensation globally. She denied that the delay was a result of pressure from the UK’s Financial Services Authority.

— “This is clearly a highly sensitised period and we are very conscious of the sensitivities,” the bank added in an official statement. “We want to be able to provide context to what we tell our people.”

(Editing by Hugo Dixon and David Evans)


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