NEARLY 6,000 UK employees at Goldman Sachs are among staff sharing out £8.1 billion in pay and bonuses for 2012 after the United States banking giant posted better-than-expected profits.
The total pay package at the bank – based on its global headcount of 32,400 – equates to an average of £249,977 for each of its employees and is 6 per cent higher than in 2011.
The bumper pay-and-bonus deal is likely to stoke further controversy after Goldman was forced to back down on plans to defer bonus payments to UK staff until the new financial year after an attack by Bank of England Governor Sir Mervyn King.
Fellow US investment banking group JP Morgan Chase also posted full-year figures yesterday, revealing its staff salary and bonus bill soared to £19.1bn, up 5 per cent on 2011.
But the chief executive, Jamie Dimon, saw his annual bonus halved – to £6.3 million after a damning report following an investigation into a trading loss.
The groups have ensured a strong start to the US bank reporting season. Goldman reported net earnings nearly trebling £4.6bn in 2012, while JP Morgan posted a record £13.2bn in profits after a 53 per cent surge in the final quarter.
Goldman’s annual haul comes after fourth-quarter earnings soared to £1.8bn, compared with £612m a year earlier, after a strong performance from its investment banking arm.
On Tuesday, the group made a climbdown on tax plans that would have potentially cost the Treasury millions of pounds.
Goldman had been proposing to allow bankers receiving bonuses to benefit from the cut in the top rate of income tax from 50p to 45p, announced by Chancellor George Osborne in last year’s Budget, which comes into effect on 6 April.
The U-turn came after pressure from the Bank and Treasury, with Sir Mervyn telling MPs it was “lacking in care and attention” to the rest of society.
The Governor made no secret of his distaste for the idea, telling MPs: “I find it a bit depressing that people who earn so much seem to think that it is even more exciting to adjust the timing of it to get the benefit of a lower tax rate, knowing that this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the financial crisis.”
Labour MP Teresa Pearce had asked Sir Mervyn whether deferring bonuses to take advantage of the lower tax rate was “ordinary tax planning or … morally repugnant”.
The Governor replied that such a scheme was “clearly not unlawful” and that investment banks were “in a privileged position” in being able to adjust the timing of the payment of bonuses to benefit from changes in the tax regime.
But he warned they risked negative publicity and public anger, telling the committee: “In the long run, financial institutions … depend on goodwill from the rest of society.”
It is understood that Treasury minister Sajid Javid contacted Goldman and arranged a phone call to discuss the issue. But the bank’s compensation committee decided to drop the scheme.
The share of revenues paid out in salary and benefits for 2012 at Goldman fell to 37.9 per cent from 42.4 per cent – the second lowest on record.