Goldman Sachs has linked bonuses and promotions to employees’ success in protecting the firm’s reputation and put new restrictions on some client transactions to avoid a repeat of the damage to its standing in the wake of the financial crisis.
Bloomberg reports that a 'new-activity committee' will evaluate and approve suitability when clients undertake transactions that carry new risks, New York-based Goldman Sachs said Thursday in a report.
When setting year-end pay, the firm is reviewing employees’ efforts to protect its reputation and win clients’ trust, according to the report.
Goldman created a business-standards committee in May 2010 as it faced a lawsuit from the Securities and Exchange Commission over a mortgage-related security called Abacus 2007-AC1. The firm settled that suit by agreeing to pay $550m, and said it made a mistake in omitting disclosures to investors in the product.
'If an Abacus transaction came today, it would encounter a completely different framework of processes, practices, procedures, transaction approval and review than what we had before', said J. Michael Evans, a Goldman Sachs partner who led the business-standards committee with E. Gerald Corrigan. 'It might have the same name, but it would look a lot different'.
Goldman already had policies in place that would claw back compensation based on individual misconduct that caused legal or reputational harm. The firm has increased the emphasis on protecting its reputation in performance reviews, Evans said.
Hit the link below to access the complete Bloomberg article: