WASHINGTON — Goldman Sachs chief executive Lloyd Blankfein says Wall Street compensation needs to be overhauled and hedge funds subjected to government oversight to reduce the kind of excessive risk-taking that stoked the global financial crisis.
Blankfein, who received compensation valued at nearly $43 million last year, said Tuesday that lessons from the crisis include the need to “apply basic standards to how we compensate people in our industry.”
The CEO of the Wall Street powerhouse suggested a handful of guidelines, including having an individual’s performance evaluated over time to avoid excessive risk-taking and paying junior employees mostly in cash. The percentage of pay awarded as company stock should increase significantly along with an employee’s total compensation, he added.
Blankfein also said unregulated pools of capital that are big enough to potentially endanger the financial system in a crisis should be put under “some degree” of government oversight. Those would include large hedge and private-equity funds.
Public anger over the financial distress and taxpayer bailout of the banking industry spilled over to Blankfein’s appearance as protesters confronted him at a gathering of the Council of Institutional Investors. The organization represents public, corporate and union pension funds that together have an estimated $3 trillion in assets.
A wave of public outrage over compensation crystallized around the millions in bonuses paid to employees by embattled insurer American International Group Inc., which has received $182 billion in federal bailout money.
