Speculation has been high as to whether or not Wall Street firms would pay out bonuses to their executives. Citing that it was “the right thing to do” executives at Goldman Sachs Group have given up their year-end bonuses for 2008, the firm has announced.
While Goldman Sachs has fared better than most other firms, its stock is down more than 60 percent in 2008, according to the Wall Street Journal, and it is expected to post its first quarterly loss as a public company in December. The executives will only receive their base salaries of $600,000 the Journal reports. The paper anticipates that other Wall Street firms may follow Goldman’s lead.
Right on the heels of this announcement, UBS announced that it would cut bonuses for top its executives. UBS, Switzerland’s largest bank, was the recipient of a $60 billion bailout this year. Its chairman says he will forgo his bonus from 2007 and 2008 until the company recovers, according to FoxBusiness.com. And, the bank announced that should it “achieve a loss in a subsequent year, no bonus will be awarded”.
On the heels of a government bailout funded by taxpayers and an economy in which many Americans are living paycheck to paycheck, many firms may justifiably fear public backlash should they pay out hefty bonuses to top executives as planned.
However, just last week, it was anticipated that firms such as Goldman and Morgan Stanley were planning on going ahaed with their bounus payouts as planned. According to a CBS news report November 12, several compensation consultants told CBS that firms were worried about losing their top talent when the economy recovered if they didn’t pay out the bonuses. CBS reported that Goldman Sachs had set aside $6.8 billion for bonuses, while Morgan Stanley had set aside $6.4 billion.