Goldman Sachs Is Doing Well. So Is Its CEO, Lloyd Blankfein
RENEE MONTAGNE, HOST:
The big bank Goldman Sachs holds its annual shareholder meeting today. These meetings are a chance for shareholders to hear from the CEO and vote on key issues, like CEO's pay. Five years ago, during the financial crisis, Goldman's CEO was a poster boy for overpaid executives. To find out how much Lloyd Blankfein is making now, we reached Neil Weinberg. He's editor-in-chief of American Banker.
Thanks for joining us.
NEIL WEINBERG: My pleasure.
MONTAGNE: So how much did Mr. Blankfein make?
WEINBERG: Well, altogether it was about $21 million - which was a nice roughly 75 percent bump up from the previous year. But it was arguably a pittance compared to the $69 million that he made in 2007.
MONTAGNE: So a lot of money in his paycheck. But when you say it was a big bump up, why?
WEINBERG: Well, Goldman Sachs has been doing pretty well, and I think what you find is what shareholders and what boards of directors mostly look at is how companies are performing. And now you're saying that the banks are for the most part doing better and the executives are seeing nice pay gains.
MONTAGNE: I'm wondering if Goldman Sachs stockholders are OK with that - given that they should be doing OK themselves?
WEINBERG: They are doing quite well and they are by all indications Lloyd Blankfein's pay was approved so the shareholders are satisfied. And what we are seeing is that shareholders however, are more broadly exerting a lot of moral suasions through so-called say on pay votes, and we saw one on JPMorgan just this week, as well.
MONTAGNE: Now one thing CEOs don't get an automatic pay deposit in their bank accounts twice a month like most of us do. Tell us what executive compensation packages are made up of.
WEINBERG: They are made of a great number of components, but the main ones are typically a relatively small salary and a much larger package of stock options, or time vested stock or stock itself. And that's been changing a lot, Renee. During the 1980s in particular, the idea was that stock options were manna from heaven, that they would align senior executive's incentives with those of shareholders. And what we found was that was not the case. In many cases, what you ended up with was very short-term incentives to goose the stock. So now what we're seeing is something of a change, particularly companies and banks are drawing out the pay. So they may pay you very well for a good performance but they're going to drag it out over a few years. And if it turns out that that was really just a mirage and they need to restate their financials or there has been some form of fraud, they're going to claw back that compensation. So what they're trying to do now is not just to align short-term incentives, but to make sure that the companies do well over the long term.
MONTAGNE: What about bonuses? I mean that is something that we heard about over these last few years and made a lot of people especially angry, because these CEOs and these executives would get these huge bonuses when their companies weren't doing well. Are the deals being made now where bonuses hinge on performance?
WEINBERG: They do tend to hinge more on performance, and certainly shareholders are actually having a say. We saw this this week. There was a very high-profile shareholder meeting at JPMorgan Chase where the question was, in this case, whether Jamie Dimon, the chief executive officer and chairman, could keep both of those titles. But you're also seeing votes on say on pay, and these are nonbinding votes where the board can do whatever it wants regardless of what the shareholders say. But in this current environment, with the spotlight on pay and the spotlight on corporate governance, it is very hard for a board of directors to go against what their shareholders are saying. Overall, we're in an era of much greater scrutiny of executive pay.
MONTAGNE: Neil Weinberg is editor-in-chief of American Banker, the daily newspaper and website. Thanks very much for talking with us.
WEINBERG: My pleasure.
MONTAGNE: And when it comes to all S&P 500 companies, the executive pay research firm Equilar just released its list of the 10 highest-paid CEOs of 2012. Top of the list, Leslie Moonves of CBS, who made just over $60 million.