London bankers at Goldman Sachs have seen their pay pot jump by more than 20% so far this year, as the bank’s surging share price added to the prospect of bumper payouts after bonus caps were lifted in the UK.
Filings covering Goldman Sachs International’s (GSI) first-quarter earnings show that it built up a $735m (£580m) pay pool in the three months to March, averaging out at about $218,000 (£170,000) each for its 3,359 staff, the bulk of whom are based in London.
That is a 23% jump on the $598m pay pot accumulated during the same period last year, as the value of share-based bonuses – which are paid in Goldman stock – soared.
Goldman’s New York-listed shares jumped to $417 by the end of March, compared with $327 a year earlier. They have since climbed to about $461 a share, after a strong period for its trading business pushed profits up 28% in the first quarter.
That was despite a 13% drop in first-quarter profits at GSI, which said inflation and geopolitical tensions had been a drag on economic and market activity.
Performance over the remaining nine months of the year will determine the final payouts for GSI’s workforce, who are also to benefit from the eradication of a bonus cap that could allow its star performers to earn up to 25 times their annual salary.
GSI’s chief executive, Richard Gnodde, announced that the bank would be changing its pay structure in March, months after UK regulators confirmed that they were formally scrapping EU rules that limited bonuses to twice an individual’s base salary.
The cap was introduced as part of changes introduced after the 2007-08 banking crash, aimed to stamp out a bonus culture blamed for encouraging short-term profits over longer-term stability.
Critics have argued that the decision to scrap the cap could incentivise risky behaviour, given that more of an individual’s pay is riding on performance.
But Goldman, which was one of the banks pushing for the reforms, said it would give banks more flexibility to weigh payouts more heavily towards bonuses, rather than fixed salaries. This makes it easier to control the size of total pay packets, depending on performance, as well as defer pay, and also potentially claw back bonuses from bankers when things go wrong, supporters have said.
The changes will apply to hundreds of Goldman’s UK staff, known as material risk takers. However, they will not apply to Goldman’s EU-based bankers.
Goldman said in a statement in March that “this approach gives us greater flexibility to manage fixed costs through the cycle and pay for performance. It brings the UK closer to the practice in other global financial centres, to support the UK as an attractive venue for talent.”
Commenting on the jump in the GSI pay pot, a Goldman Sachs spokesperson said that “it is highly ambitious to speculate on year-end compensation based on first-quarter results”.
• This article was amended on 27 May 2024 to show that the Goldman Sachs share price was trading at $417 not 417 US cents.
