Goldman Sachs (GS) will be offering "special" stock compensation with a five year redemption period.
NY Times headliner: Goldman Sachs Alters Its Bonus Policy to Quell Uproar
Consider this, when does management not pay cash bonuses for top execs for the next year? When it does not have cash to pay said bonuses for the next year. Why did the company choose "special stock"? Because "special stock" can have profitability guarantees or special exercise rights.
Quoting the NY Times article, "Mr. Blankfein, who declined a bonus last year, received a $53.4 million bonus in 2007, a Wall Street record. This year, he and other top executives will receive bonuses in the form of what Goldman called “shares at risk,” or stock that cannot be sold for five years and can be retracted if the executive does something reckless or risky that hurts the firm."
Sounds great for the shareholders, very politically written, but something is in the wind. Especially watch for other banks to initiate similar deals. The public has been told about the "risk" details, but not the reward or special provisions.
These five year retainers may stagnate the growth potential of Goldman, because each executive's decisions rides on avoiding risk or reckless behavior.
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