Tuesday, January 26, 2010

Goldman bonuses grow on Obama stock rout (GS)

From the New York Post:

By trying to do the right thing on bonuses, Goldman Sachs CEO Lloyd Blankfein might have inadvertently done very right by his employees -- while at the same time creating unintended consequences.

And he can thank President Obama.

Though Blankfein was trying to stave off another p.r. nightmare by reducing the cash component of bonuses in favor of more stock, he and the bank's 30 top employees got a huge gift last Thursday when Obama once again declared war on Wall Street, this time proposing limits on banks' risk-taking and limiting investment banking activities at firms that also run commercial banks.

The news sent bank shares tumbling sharply both Thursday and Friday -- the day on which Goldman priced shares it will use to pay employees. But because Goldman's stock had sunk more than 8 percent during that two-day sell off, Goldman employees will end up getting more stock to reach the dollar equivalent of their bonuses. And that means the bonus amount could be even higher as the shares recover.

Goldman shares closed basically flat at $154.98, vs. Friday's close of $154.12....MORE

Bloomberg had the story before the Post, with:

Goldman Sachs Bonuses May Get Boost as Obama Plan Hammers Stock
President Barack Obama’s call last week to curb bank risk-taking and crack down on “obscene” Wall Street bonuses may help boost those very payouts at Goldman Sachs Group Inc.

Goldman Sachs, like many banks, is awarding more of its bonuses in stock to tie them more closely to performance. The firm priced those shares at $154.12, the closing level on Jan. 22, a person familiar with the matter said, after a two-day, 8.1 percent slide prompted by Obama’s plan.

The biggest two-day drop since March means employees will receive more shares than they would have earlier in the week, and have a greater opportunity to profit should the stock gain. The firm said last month that its top 30 executives will get bonuses entirely in stock that they can’t sell for five years. Goldman Sachs rose 1.9 percent to $156.99 at 12:19 p.m....MORE


Back on Dec. 4 we posted "Is This Why the Stock is Trending Down?: "Top Goldman Sachs Executives Are Likely to Receive Their Annual Bonuses in Stock " (GS)" and guessed at a $150 stock on pricing day:

As the old traders used to say, "Well bought is half sold". Why take your bonus in stock valued at $200 if you can get a third more shares when it's priced at $150. I'm just sayin'...