No matter what Goldman Sachs (GS) does to make its huge bonus payments more palatable to taxpayers, shareholders, and the government, the more criticism the company faces about its compensation packages. The bank has decided to force its 30-person management committee to take 2009 bonus money in Goldman shares and has also said it will establish a $500 million fund along with Warren Buffett to help small businesses. Now the bank's management has come with a new way to try to mollify its critics: It may force its bankers to give a much larger portion of their compensation to charity.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%According to The New York Times, "While the details of the latest charity initiative are still under discussion, the firm's executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay."
The action probably won't work because the core objection to the Goldman pay packages is that they should not be given in the first place. Gifts to charity will probably get Goldman managers tax write-offs, and charitable gifts will do nothing to help earnings or satisfy government concerns that Goldman is setting a pay practice precedent that other banks will follow.
The outrage over Goldman's pay packages is partially based on the government's rejection of the notion that a firm which took federal TARP dollars should reward its senior employees so richly. Goldman shareholders believe that more of Goldman's revenue should go to earnings or be paid out in dividends. One Indiana pension operation which owns Goldman stock, The Central Laborers' Pension Fund, has filed to get the firm to cut payouts.
Goldman's bankers may make the relatively fair argument that they are well-paid because of the firm's results, but public company CEOs have been making the same argument for years, and it has always fallen on deaf ears.
Goldman May Force Bankers to Give More to Charity