- Workers receive average of ?238,000
- Goldman's global pot for pay and bonuses is ?8.2bn
- Vince Cable: 'Awards reflect lack of reality about the world we now live in'
- Goldman Sachs announce profit fall from ?5.5bn in 2010 to ?1.95bn last year
By Nick Enoch
Last updated at 5:33 PM on 18th January 2012
London bankers at Goldman Sachs are in line for a pay and bonus pot of ?1.5billion, despite a fall in profits.
With Britain in the grip of a recession, the announcement will only add to public fury over City payouts.
The company, which is awarding its workers ?8.2billion globally, has 5,300 staff based in Britain.
Business Secretary Vince Cable said: 'These pay awards reflect a basic lack of reality about the world we now live in.
The company, which is awarding its workers ?8.2billion globally, has 5,300 staff based in Britain
'The concern is that it could have a knock-on effect throughout the banking sector at exactly the time the Government and businesses are urging restraint.'
Goldman is paying out an average of ?238,000 in salary, bonuses and equity awards to its approximate 30,000 staff globally for their efforts in 2011.
This is down from an average ?280,000 the previous year.
David Viniar, Goldman's finance director, insisted that 'discretionary' bonuses were down 'considerably more than revenues' during the year.
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The news comes despite disappointing annual results from the investment bank.
Goldman Sachs (nicknamed the 'Vampire Squid' as its tentacles stretch far and wide) revealed profits fell to ?1.95billion last year, from ?5.5billion in 2010.
This would make it its second lowest annual profit in almost ten years, reflecting the impact Europe's debt crisis is having on the Wall Street bank.
The total pot this year is ?1.8billion less than the ?10billion awarded for their efforts the previous year.
Occupy London protesters outside St Paul's making a stand against corporate greed
The dip in profits also underlines the struggle the bank, under chief executive Lloyd Blankfein, is facing from new regulations.
The Volcker Rule, due to come into force in July, bans banks from gambling with their own money and limits the amount of capital they can invest in hedge funds and private equity investments.
Former banker William Cohan said: 'I think a firm like Goldman has real problems.
'Some of the lines they've been traditionally strong in are being regulated out of existence,' he told The Daily Telegraph.
Goldman is axing 1,000 jobs and cutting ?780million in costs by the middle of the year to protect profits.
However, it may take some solace in the fact it topped the mergers and acquisitions league table in the UK, consulting on deals worth ?76.5billion.
A protester waves a sign outside Goldman Sachs's New York HQ
Preparing for 'doughnut' bonuses
The bars around London's finance district may soon start filling up with bankers fresh from pay discussions, but not many will be there to splash their bonus cash. ? ?
This year zero bonuses, known as 'doughnuts', will affect even senior staff and could include a bigger proportion of employees than in the 2008 financial crisis, bankers and headhunters predicted as U.S. firms start telling bankers this week what they will get.???
Slumping quarterly profits, a darkening long-term outlook for the industry and unrelenting pressure from politicians and an angry public, are pushing bank bosses to break away from a culture in which most staff expect a bonus every year and base their personal budget around it.??
'This will probably be the worst year for zero bonuses we've seen, although those that will have done well will still get something,' said Jason Kennedy, who runs recruiting firm Kennedy Group.???
'Global heads and senior managing directors are among those that will get nothing -- they're the expensive staff, and they'll be living off their higher salaries.'
Underperforming bankers already came under pressure in the 2010 bonus round as 'doughnuts' multiplied, but this time division heads are raising the bar and reserving payouts for an even smaller group of star bankers.???
Bonuses would be down at least 30 per cent for those that do get one, Kennedy said, while other recruiters predict cuts of up to 70 per cent in some areas, such as bond trading.???
Bankers at Goldman Sachs, Morgan Stanley, JP Morgan and Citi are among those expecting to hear about their bonuses this week, coinciding with these firms' fourth quarter results. ???
Overall pay at JP Morgan's investment bank came in at $8.8billion, down 9 per cent on 2010 levels, while total revenues for the year were flat, its filings showed last week.????
PUBLIC FURY OVER BANK BONUSES
Bonuses at RBS could total as much as ?500million
The rise of 'doughnuts' will not mean the end to bonuses or to public anger over payouts.???
At government-controlled banks like Britain's Royal Bank of Scotland, where bonuses are likely to total ?400-500million, according to sources and company reports, these rewards are still under fire.???
'It's extremely difficult to justify any bonus at all at a state-owned bailed-out bank,' Tory MP Steve Baker said.???
Baker joined about 40 anti-capitalist protesters from the 'Occupy London' movement in a gathering outside the offices of Britain's financial watchdog last week, condemning excessive executive pay.???
Ahead of this year's bonus season, the British government has also moved to clamp down on rewards by suggesting shareholders should get a veto on pay. ???
As scrutiny of investment banks' pay practices mounts, many are already taking their own steps to amend the structure of rewards, beyond just cutting them. ???
Morgan Stanley will reportedly tell employees this week that cash payouts will be capped at ?80,000 ($125,000), with any portion received above this deferred until at least the end of the year.
Top management might defer their entire bonuses for 2012.?
Antonio Horta-Osorio, the boss of taxpayer-backed Lloyds Banking Group, revealed last week that he would not take his annual bonus for last year
'Whiter than white' senior bankers???
Since 2009, salaries have often doubled for top investment bankers, to around ?350,000 ($536,500) on average, according to recruiters' estimates. ????
This was after firms tried to find ways around a bonus tax in Britain and tougher rules on rewards across Europe.
It put additional pressure on bonus pots, through which firms still have some leverage to cut pay costs.???
Senior bankers in charge of bonus decisions for their teams have been talking tough about pay for months, preparing staff for lower payouts by pointing to the thousands of jobs being cut across the industry and to the rise in salaries.???
'We've got to be realistic. We're not talking hardship here,' said a division head at one major U.S. firm.
'There is a psychological impact when you don't get a bonus - it used to mean you're not doing well and could be let go.
'It doesn't make the [bonus] conversation very easy, but this year there will be strength in numbers.'?
Many expect these senior bankers to be among those to forgo big payouts, partly as a move to appease disgruntled staff.?? ???
'They have to be seen to be whiter than white, and not to be necessarily paying themselves but the performers in their teams,' said Jonathan Evans, chairman of headhunters Sammons Associates.???
Last week, the boss of Lloyds Banking Group forfeited a ?2.4million bonus for 2011, saying he wants to share the pain being suffered by ordinary people.
Ant?nio Horta-Os?rio, who returned to work this month after treatment at the Priory clinic for exhaustion, said his bonus should reflect ?the tough financial circumstances that many people are facing?.
But the 47-year-old Portuguese executive could still earn up to ?10million for 2011, thanks to a ?golden handshake? awarded to compensate him for benefits lost when he left Santander UK to join Lloyds.
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