Goldman Sachs to cut London bankers’ pay

US investment banking firm invokes contract clause enabling it to cut pay of London-based bankers US investment banking firm Goldman Sachs is cutting the pay of hundreds of its London bankers. The bank, which ratcheted up basic pay in 2009 in order to avoid the then Labour government’s bankers’ bonuses tax, has invoked a clause in its investment bankers’ contract to cut their pay back down. Goldman, which employs 5,500 staff in London, this week told employees that their basic pay will be cut this summer. It comes two years after the bank changed the contracts of London-based bankers to increase the amount it paid in basic pay and decreased bonus payments in order to help them avoid the then chancellor Alistair Darling’s bankers’ bonus tax . The shift away from big bonuses after the financial crisis led to bankers’ basic pay being increased by 50-100%. Last year Goldman paid its staff an average of $430,000 (£263,000). The bank’s total pay and bonus pool was $15.3bn. The pay cut is thought to affect staff at managing director or partner level. Goldman refused to comment. Bank bosses complain that political pressure forcing them to reduce bonuses has made it difficult for them to remove underperforming staff. Rich Ricci, co-chief executive of Barclays Capital, told the Financial Times last week that: “These days, when a banker doesn’t get a bonus, they no longer leave automatically. They’ve got their salaries to fall back on – and, really, there’s nowhere else for them to go.” Chris Forbes, the chief executive of PHD Search and Selection, a banking sector headhunter, said paying bankers high base salaries and lower bonuses does not produce the best results for banks as it removes the performance incentive. “High base salaries and low bonuses are not part of the traditional culture of the City and certainly reducing base salaries will lead the way to greater attrition of low performers.” The pay cut comes after Goldman announced an 18% fall in second-quarter revenue to $7.28bn and banks worldwide have announced 60,000 redundancies over the last few weeks. Barclays said on Thursday that it was cutting 140 jobs in its corporate business arm as part of plans to reduce costs. A spokesman for the bank said the redundancies will be in the UK infrastructure operations for Barclays Corporate, which is being brought closer together with the Barclays Capital investment bank arm. Barclays Corporate cut about 500 infrastructure jobs in May ago. It employs just over 11,000 staff. A survey today shows junior bankers on Wall Street are so unhappy with their pay they are considering quitting for jobs in private equity. A survey by headhunting firm Capstone Partnership found 60% of young US bankers are dissatisfied with their pay and want to leave the industry. “It’s been a rough couple of years for them,” said Rik Kopelan, managing partner at New York-based Capstone. “Fewer and fewer plan on making it a career, because they’re working these long hours and not getting paid as well as they were.” One investment banker said the banks had breached the “tacit understanding” that he or she would be well compensated. Considering “the sacrifice I make in my personal life (100-hour work weeks, cancelled vacations, etc.), this business has to be more rewarding,” the person said, according to a Bloomberg report of the survey. More than 80% of respondents said they did not believe their pay matched their effort and performance. Goldman Sachs Executive pay and bonuses Banking Barclays Global economy Recession Financial crisis Private equity United States Rupert Neate guardian.co.uk

Posted by on August 25, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.