I've had my fair share of skeptical things to say about big firms like Goldman Sachs, but I do take note when they do something right. Goldman is going to make a greater effort to tie compensation to performance:
The good news is that top executives will have their fate tied more closely to the long-term health of the firm, so closing some big deals one year won't have an outsized impact. The bad news is that this kind of structure tempts executives to play games with reported earnings and leverage that can skew compensation upward. Please, Goldmanites, don't wreck your balance sheet just to shoehorn an extra dime into your deferred compensation account.
The investment bank, based in New York, said in a regulatory filing this week that bonuses will be linked to financial benchmarks that might include return on equity, earnings, or the price of Goldman's stock or other securities issued by the company.
The good news is that top executives will have their fate tied more closely to the long-term health of the firm, so closing some big deals one year won't have an outsized impact. The bad news is that this kind of structure tempts executives to play games with reported earnings and leverage that can skew compensation upward. Please, Goldmanites, don't wreck your balance sheet just to shoehorn an extra dime into your deferred compensation account.
