Blankfein drops the hammer

Not really a "hammer", as this was more draconian when Goldman was still a partnership...which was not that long ago.

I don't think you can buy condos with deferred equity....

Bring back the Irish carpenters!

Goldman as a partnership may have been more draconian, but as an overall policy for the financial services industry, this is THE HAMMER.

This is far from the hammer - most firms had something like this is in place already - Lehman had all of these - equity awards were on a 5yr vesting schedule, and % of deferred stock as a % of comp increased as you became more senior/made more money. Fat lot of good it did them

I'm not so concerned with how any compensation policy affects the decision making of financial services firms. In financial services, there will always be booms, greed/theft, and then busts. The only "legislation" or "compensation policy" that could prevent that cycle would be outlawing financial services.

I'm only addressing what the financial industry's top dog (CEO of Goldman) has proposed as the regulation for his own industry. What he's established is the floor. It won't be better for the industry than this - as you say more or less the Lehman policy which was certainly among the most stringent. No doubt that the governments proposal will be at some other extreme, and reality will end up somewhere in the middle.

As a comparison, for 2007 Mr. Fuld received a $35 million stock bonus. Restricted stock which doesn't buy apartments. Mr. Blankfein claimed a record bonus totaling nearly $68 million, $41.1 million in stock and options (some restricted, some not) and $26.8 million in cash. It's (mostly) that cash that causes real estate transactions in this town.

Mr. Blankfein has just proposed a system where his compensation would have been $68 million in restricted equity - mostly restricted until he retires. A similar net would be cast around a wide circle of individuals at Goldman as well as throughout other firms in the industry which will trickle down at least to the director level and probably lower.

If that's the best the industry will get (and it will probably be worse), what does that disappearance of liquidity mean to the real estate market?

"This is far from the hammer - most firms had something like this is in place already - Lehman had all of these - equity awards were on a 5yr vesting schedule, and % of deferred stock as a % of comp increased as you became more senior/made more money. Fat lot of good it did them"

Only if you ignore key points...

"Compensation should be based on an annual salary plus deferred compensation tied to performance over the course of a year."

That says ALL bonus is deferred.

AND they're talking about even bigger % in equity (tons of banks were paying up to $750k in cash).

AND there is a huge difference between a 5 year vesting schedule and not being able to sell until retirements.

This is HUGE for the middle and lower tiers if it becomes standard.

This will just hasten the outflow of talent to the boutique and foreign firms that pay out cash, or it will require a substantial increase in base salaries. If you're a trader or a banker bringing $10mm into the firm, you'll get paid there, or go somewhere else to get paid.

Well, actually the boutique firms are largely partnerships, so you lie. Partnerships generally make you hold until retirement. And the large foreign firms are generally doing similar, or are about to. There will be exceptions of course.

First of all, every partnership is different. In general, an investment bank partnership would require you to keep your capital in the firm till retirement, yes (and then pay you out over a period of years). But you don't keep all of your earnings in the firm till retirement - just the amount the partners think is necessary for running the business.
And of course, most of the people working at the partnership are not partners - since there is no equity, you get cash - just ask any law firm associate.

no response on my points... so I take it that you are recanting your "most firms had something like this is in place already" claim?

> and foreign firms that pay out cash

Like UBS?

;-)

> If you're a trader or a banker bringing $10mm into the firm,

Problem is, the majority of people who were "bringing $10mm into the firm" actually weren't... no one is going to pay $2 mil to the guy who brings in $10mm by risking $10 billion.

"And of course, most of the people working at the partnership are not partners - since there is no equity, you get cash - just ask any law firm associate."

And if we move to law firm salaries for bankers, we're even more screwed than we thought.

nyc10022 - you can always find exceptions to the rule. Most banks have had, for quite some time, structures that were more heavily tilted towards deferred equity and options the greater your compensation. I'm sorry that I don't have the comp policies of each and every bank at my fingertips.

And where did I say that salaries for bankers were moving towards that for law firms? - I was merely pointing out the structure, not the magnitude. Sounds an awful lot like you are making a straw man argument, don't you think?

"Most banks have had, for quite some time, structures that were more heavily tilted towards deferred equity and options the greater your compensation. I'm sorry that I don't have the comp policies of each and every bank at my fingertips."

Then don't make blanket statements.

You were WRONG. That your excuse was you didn't have the data.... well, that makes it worse.

You clearly know nothing about the current state, so your statements about how the proposed scheme is no big change is a HUNK OF BULLCRAP.

These are significant changes proposed, and that you think they aren't just means you don't know anything.

Outflow of talent? What talent? These clowns have been exposed for the con men they are. The economic crisis has exposed the myth of business-school expertise. The MBA will soon be joining equities and house titles in the museum of formerly overvalued pieces of paper. I have been working in IT all my life, now talk about some amazing talent.
All these Wall Street Masters of the Universe are nothing more than overvalued narcissistic delusional jackasses!!!

prediction

GS will go back to its roots >>>>>> partnership

hard to see at the moment, but that bet is better than 50:50

This is not a hammer.. this is a small variation on existing policies at most firms...move along now..

Yes, if we pretend nothing is happening, I'm sure it won't actually happen.

Small variation my ass... we're talking about folks who used to be able to cash out completely in 5 years now having to wait FIFTY. $750k or more in cash going to ZERO.

Wow, some folks are in total denial.