Kenneth R. Feinberg, President Obama’s former pay czar, received a lukewarm reception from Wall Street this year when he suggested that firms adopt a so-called brake provision that would allow employee compensation agreements at big banks to be broken if the government were forced to step and bail them out.
Goldman Sachs disclosed in a regulatory filing that it had adopted just such a brake proposal. The filing says that if the government is forced to bail Goldman out, most of the firm’s outstanding compensation awards “shall immediately terminate.”
The move was applauded by some pay experts as a good corporate governance practice. The brake proposal followed a broad outcry over the American International Group’s payout of millions of dollars in bonuses in 2009 even though the government had pumped billions of dollars into the company to rescue it the previous year.
Still, there is no danger that Goldman’s adoption of the provision will derail its bonuses for 2010. Goldman is thriving. It earned $5.97 billion during the first nine months of the year and put aside $13.1 billion in pay for its 35,400 employees. Goldman employees are expected to find out in the third week of January what their bonuses will be and will most likely receive them in early February.
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