Wall Street powerhouse Goldman Sachs Group Inc. disclosed Tuesday that it would pay its chief executive a $53.4-million annual bonus, a Wall Street record that shatters the previous $40-million mark set just last week.
The size of the bonus to Lloyd Blankfein was expected given that Goldman notched blockbuster earnings this year.
But it nonetheless raised some eyebrows because more than half would be paid out in cash rather than in restricted stock and options, which could fall in value if the company were to falter.
"I certainly applaud the performance and I don't begrudge the amount," said Brian Foley, an executive-pay consultant in White Plains, N.Y. "But I'm disappointed that so much of it is in cash and more of it isn't in stock that would still be on the table."
Blankfein, who assumed the top job in June after his predecessor, Henry M. Paulson Jr., became U.S. Treasury secretary, will receive almost $27.3 million in cash, $15.7 million in restricted stock and $10.5 million in options, according to a filing with the Securities and Exchange Commission.
Lush pay packages are commonplace on Wall Street -- especially this year when profit has surged amid a rising stock market -- but they often consist of large amounts of restricted stock and options.
Paulson's roughly $37-million bonus last year was all in stock, as was the $40-million bonus handed out last week to Morgan Stanley CEO John Mack.
"We think the filing speaks for itself," Goldman Sachs spokesman Peter Rose said, declining to comment further.
The amount of stock-based compensation is especially notable at Goldman, which derives a large portion of its revenue from securities trading. Trading has generated outsize profit for the company in recent years, but it is even more vulnerable to financial market fluctuations than Goldman's core investment-banking business.
"They've been remarkably successful and lucky the past three years," said Alan Johnson, a New York compensation consultant.
Rich paydays are common across Wall Street this year. New York's financial industry will pocket a record $23.9 billion in bonuses this year, 17% more than the $20.5 billion given out last year, according to the state comptroller's office.
Even when measured against other Wall Street firms, Goldman's profit this year was dazzling. Its annual earnings surged 70% to more than $9.5 billion, a high-water mark on Wall Street.
Goldman is paying $16.5 billion in compensation this year, an average of more than $600,000 per employee.
Outsize pay packages on Wall Street often are justified because they are performance-based, said Charles Elson of the Weinberg Center for Corporate Governance at the University of Delaware. But he questioned whether some of that performance simply comes from positive economic conditions.
"To the extent that those profits are generated through individual effort, the bonuses are legitimate," Elson said. "But where the returns are based on macro forces outside the control of the individual is where issues come up."
The Standard & Poor's 500 index of the nation's biggest publicly traded companies is up 14.2% this year, its biggest gain since 2003. Goldman shares slipped $2, or 1%, to $201.24 in Tuesday trading, but the firm's shares were up 58% for the year.
Huge Wall Street bonuses are fueling New York's economy. But it's hard not to notice how much Wall Streeters are earning compared with everybody else.
"From a societal standpoint, it's not just athletes and movie stars but lawyers and investment bankers" that are earning enormous paydays, Johnson said. "The gap in pay between them and the average person continues to widen."