CEO of Goldman: Wall St. Needs Overhaul Executive Pay

 

Thursday, Apr 09,2009, 11:19:58 AM   Click:

Copyright: The Associated Press. All rights reserved. May This material may not be published, broadcast, rewritten or redistributed.
Source: Associated Press
Wordcount:

WASHINGTON_Goldman Sachs CEO Lloyd Blankfein said Wall Street compensation must be revised and subject to supervision of hedge funds of the government to reduce the type of excessive risk-taking stoked that the global financial crisis.

Lloyd Blankfein, who received compensation valued at nearly $ 43 million last year, said Tuesday that the lessons of the crisis, including the need to "basic standards applicable to how we compensate people in our industry .

The CEO of the power of Wall Street offers a few guidelines, including an individual assessment of performance over time to avoid excessive risk-taking and paying only the most junior employees species. The percentage of compensation as the company stock should increase significantly with an employee of the total remuneration, he added.

Blankfein also said no pools of capital that are large enough to potentially jeopardize the financial crisis should be put under a degree of government oversight. Those include large hedge and private equity funds.

The wrath of the public on financial distress and the taxpayer bailout of the banking sector has spilled to the appearance that Blankfein demonstrators confronted at a meeting of the Council of Institutional Investors. The organization represents public, corporate and union and pension funds have $ 3 trillion in assets.


A wave of public outrage over compensation has crystallized around millions in bonuses paid to employees by Embattled insurer American International Group Inc, which received $ 182 billion in federal bailout funds. Timothy Geithner Treasury Secretary and Federal Reserve Chairman Ben Bernanke have hired a new regulatory regime that would set standards for compensation for financial institutions.

Many people think that banks and other financial institutions to reward them for their leadership in the short term and high risk, with gains in long-term negative consequences.

"Much of the past year has been very humiliating for my sector," Blankfein said, acknowledging that it could take years to rebuild the confidence of investors have lost in part by industry practices that seem " self-service gourmet and down. "

Capital and lending standards for banks should be subjected to more "dynamic regulation", while hedge funds _ which attract hundreds of millions of dollars of pension funds, charities, universities and as endowments and wealthy individuals _ and private equity should be regulated, he said.

The Obama administration has recently submitted a plan in Congress would require hedge funds more broadly, and other private pools of capital such as venture capital funds, register with the Securities and Exchange Commission. Such a measure would open their books to federal inspection.

Goldman Sachs Group Inc. recently said it hopes to return $ 10 billion of government investments in the program of financial bailout as soon as possible.

Former Goldman executives have inhabited the White House and Cabinet as part of both parties, and the company casts a footprint of influence in Washington. Former Treasury Secretary Henry Paulson _ the main architect of the government's bank rescue was _ Blankfein's predecessor as CEO of Goldman.

Blankfein remarks in Washington, Wall Street demanding higher standards, recall Paulson gave a speech in 2002 at the height of corporate scandals. Paulson, then CEO of Goldman, has called for changes in how public companies are managed and regulated struggled to help restore investor confidence and financial markets of the lameness.

As Blankfein began his speech Tuesday at the meeting in a hotel ballroom, two members of CODEPINK, women in the anti-war activist group, has appeared on stage with a big pink banner saying: "We want $$$$$ our return.

Blankfein asked them to leave and they did. But the women later accused on the stage and podium cries of protest against the bailout. The demonstrators reflected a view that is real and visceral, "he said.

"All the money given to Wall Street was never intended to be permanent," said Blankfein.


The standards it proposes for the executive in the securities sector should take into account the ability to identify and create value, "he said.

In other Blankfein suggested guidelines:

_Compensation Should include an annual salary of more than deferred compensation.

_All Stock price should be subject to future delivery or delayed their ability to exercise for at least three years.

_Senior Officials should be required to retain the bulk of the stock until they receive their retirement.

Jim Schnorf, a board member of the Eastern Illinois University Foundation, Blankfein said the comments were constructive, in the light of the need to recast the role of price options incentives the company executives.

"It is certainly to be a mechanism to align management interests of what is best for shareholders," said Schnorf.

Blankfein received compensation valued at $ 42.9 million in fiscal 2008, almost all of it from stock options awarded and for its performance the previous year, according to a calculation of the Associated Press recently published data by the company. There was no performance-based remuneration for his work in fiscal 2008, Goldman Sachs said in its first quarterly loss since it became a public company and its shares fell more than 60 per cent in the middle of the worsening credit crisis.