The sharp and growing criticism over fat bonus payments to executives of bailed-out banks surfaced anew yesterday on both sides of the Atlantic Ocean.
In the United States, Goldman Sachs Group Inc. said its top 30 executives would not receive cash bonuses this year, as the Wall Street giant tries to avoid congressional intervention in pay practices.
Meanwhile, British Prime Minister Gordon Brown and French President Nicolas Sarkozy agreed it was a good idea to slap higher taxes on performance pay, especially considering that bonuses are rising again after last year's financial meltdown that led to taxpayer-funded bailouts in some cases. German Chancellor Angela Merkel also embraced the idea.
"We agree that a one-off tax in relation to bonuses should be considered a priority," Brown and Sarkozy wrote in an editorial in the Wall Street Journal.
Brown's government said Wednesday that it would impose a onetime, 50 percent tax on 2009 bonuses above $40,800, and French and British diplomats said Sarkozy made a similar commitment.
The majority of compensation for Goldman's senior management has traditionally been paid in year-end bonuses.
But this year, the company said, its highest executives will receive stock that cannot be sold for at least five years. The idea is to give them an incentive to help boost the company's business and, in turn, its share price.
Goldman has been among the strongest banks in the country during the last year, quickly recovering from the credit crisis. But as its profits started to swell, critics questioned Goldman's lavish pay packages at a time when the broader economy was still weak.
The stock awards will consist of so-called shares-at-risk, allowing Goldman Sachs to repossess them if the firm determines that an executive failed to adequately analyze or raise concern about risks, the company said.
Goldman Sachs will also give shareholders a nonbinding vote on compensation.