As part of a new series on the structure of compensation at investment banks, we're looking at the way you can expect to get your bonus structured at various pay levels across leading investment banks. How much will you be paid in cash? How much will you be paid in stock (or in some cases, CoCos)? How long will you have to wait until your stock becomes available? Basically, how much of your bonus will be disposable income on a year-by-year basis?
To start the process, we've looked at Goldman Sachs. The U.S. bank is tight-lipped when it comes to compensation. Goldman provides fewer details on pay than its UK and continental European counterparts in its annual report and offers detailed compensation information only for its senior executives in its proxy statement. We know from Goldman's most recent UK regulatory filing that it pays its London-based 'code staff' a high proportion of stock - stock accounted for 75% of the total in 2012. However, those figures are now outdated and apply only to the bank's 115 key risk takers, senior managers, and important control staff. Generally, it seems that Goldman is far, far more generous with its cash.
The charts below are derived from conversations with multiple international headhunting firms in London. They are based upon these firms' recorded information following their conversations with current Goldman employees and with people who've moved out of Goldman Sachs. They apply to revenue generating staff but not to key risk takers in London, whose compensation is dictated by EU pay rules specifying that at least 40% of bonuses must be deferred. The charts have not been corroborated by the firm itself (Goldman declines to discuss pay) and are necessarily qualitative. If you work at Goldman Sachs and would like to add to the information below, please get in touch via the comments box at the bottom of this page.
At 'low' levels, we understand that Goldman generally pays the entirety of its front office bonuses in cash. If you earn a $250k bonus at Goldman, you will therefore probably get the whole thing to spend immediately.
Beyond $250k, it seems that Goldman starts deferring pay. However, its deferrals are small compared to European rivals. If you receive a $500k bonus at Goldman, we understand that only 20% will be deferred. That deferred portion will be split between cash and stock and staggered over three years, delivered in equal tranches of 1/3, 1/3, 1/3 over the period. However, as per the explanation on page 213 on Goldman's annual report, the bank imposes additional transfer restrictions on its restricted stock units and specifies that they can't be sold until January 2019. We also understand that 50% of the deferred stock portion of the bonus is subject to a clawback related to continued service. The proportion of the deferred bonus to which this clawback applies varies by division and seniority. In early 2014, 30% of all the restricted stock awards that Goldman issued globally (for the 2013 bonus round) were subject to this clawback restriction.
Seven-figure bonuses are also understood to be subject to minimal deferrals at Goldman Sachs. Headhunters and Goldman insiders report that only 35% of a $1m bonus at the bank will be deferred. The deferred portion will be subject to the restrictions outlined above.