Goldman Sachs adopts new targets on executive pay packages

Goldman Sachsplaced new targets on the pay package of Lloyd Blankfein and other top executives in response to shareholder and regulatory calls for tougher industry standards.

Mr Blankfein, chief executive, Gary Cohn, chief operating officer, and Harvey Schwartz, chief financial officer, will receive half of their stock awards for 2014 with strings attached.

To get a full pay out on new "performance stock units", Goldman would have to record a return on equity of 11 per cent between 2015 and 2017. In a separate "long-term incentive programme", which could award Mr Blankfein a $10.5m bonus, Goldman kept an existing ROE target of 12 per cent.

The pay targets are the closest Goldman comes to a formal goal for profitability.

Mike Mayo, analyst at CLSA, who has pressed the company repeatedly to announce an official target, said they were a "backdoor" way of seeing Goldman's profitability goal.

After the financial crisis, and wave of regulation, investors remain uncertain about the potential profitability of Wall Street banks.

When it went public in 1999, Goldman made a return on equity of more than 30 per cent. In the pre-crisis boom, its returns exceeded 20 per cent.

But since then, like other big investment banks, its performance has been much more muted, partly because new rules force it to hold much more equity to guard against losses. Last year its ROE was 10.5 per cent, still higher than most rivals.

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The tougher standards follow discussions between Goldman and both shareholders and regulators including the Federal Reserve.

Mr Blankfein will make $7m under the long-term incentive programme if Goldman makes a ROE of 12 per cent over eight years and increases its book value per share by an average of 7 per cent. But he can make 150 per cent of that, or $10.5m, if Goldman makes a ROE of 15 per cent.

For Goldman followers playing the game of who will succeed Mr Blankfein, there was a slightly different pecking order in this year's LTIP. Last year Mr Blankfein and Mr Cohn were awarded $6m, Mark Schwartz, the head of Asia was awarded $5m and John Weinberg, then co-head of investment banking, was given $4m.

This year Mr Blankfein was awarded the most, $7m, with Mr Cohn, Mr Schwartz and Michael Sherwood, head of Goldman's operations in London, all awarded $6.7m and Mr Schwartz awarded $4m.

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