Blankfein on Compensation
Lloyd Blankfein (2008 compensation $43 million) thinks Wall Street needs to rethink the way financial people are compensated. What's needed, he says, are "basic standards."
Among the guidelines the Goldman Sachs chief executive suggested in a speech to the Council of Institutional Investors: Only junior employees should be paid mostly in cash, and the percentage of pay that comes as company stock should increase along with a worker's pay. He also said compensation should reflect a worker's ability to "to identify and create value," according to the Associated Press.
Among his other suggestions:
- Compensation should include annual salary and deferred compensation.
- Senior employees should receive mostly deferred equity.
- Avoiding excessive risk-taking should be evaluated over time.
- Senior executives should have to keep most of their stock until they retire.
Blankfein also said financial companies must clearly elevate risk managers so they are on par with "counterparts in revenue producing divisions," reports The Wall Street Journal.
"Too many financial institutions and investors simply outsourced their risk management," Mr. Blankfein said, according to the Journal. "Rather than undertake their own analysis, they relied on the rating agencies to do the essential work of risk analysis for them."