Big shareholders push Goldman to pass on more profit to investors

Zurich: Big shareholders at Goldman Sachs have asked the US bank — on track to deliver $20 billion (Dh73.4 billion) in bonuses — to pass more profit to investors after it quadrupled quarterly net profit, the Wall Street Journal reported.

Although investors are not pushing for a huge cut, they feel Goldman, which received $10 billion of taxpayer help during the credit crisis, should better reward them for this year's rebound, the paper said, quoting people familiar with the situation.

A year after the implosion of former US bank giant Lehman Brothers, there is concern among regulators and politicians that bankers' bonuses are climbing back to pre-crisis level and shareholder rights' lobbies have called for closer scrutiny of pay.

Psychological value

"This is particularly of psychological importance because it is self-imposed and not government-imposed. We have to try to all move toward the same approach to maintain the talent pool," Lutz Raettig, Morgan Stanley's chairman in Germany, said.

Reacting to public outrage to bankers' greed and fat-cat paycheques in the run-up to the crisis, the Group of 20 nations agreed on guidelines for bankers' pay that would put the focus more on long-term performance rather than short-term gains.

The US bank has repaid the government cash it received, but its robust performance this year is pushing investors to ask for higher returns.

Goldman generated net income in in excess of $3 billion in the third quarter.

The shareholders are also concerned about a change in the company's financial statements that increased the firm's total headcount by adding temporary employees and consultants.

Due to the change, it looked like Goldman employees are on pace to earn $717,000 per person in 2009, the Journal said.

The US in June appointed ‘pay czar' Kenneth Feinberg to review pay at some of America's biggest companies.

Regulators in Britain, France and Switzerland are already taking steps to introduce new new rules on bankers' compensation. Some banks, like Credit Suisse, moved fast to adapt their pay structure to fit with the new international guidelines.