Goldman Sachs Group Inc has established a new long-term bonus plan that lets the board award cash and stock on top of existing compensation, but lets the firm take back money if the employee takes too much risk.
The plan, aimed at what the firm called "key employees," is intended to reward executives if the bank performs well long-term, and ensure the firm does not take imprudent risk.
It was designed in conjunction with Goldman's chief risk officer, who will review awards under the program, the bank said.
The extensive risk controls also bring the bonus program in line with the Dodd-Frank Act, which calls on regulators to block any bonus program that encourages inappropriate risk-taking at large firms.
The compensation committee will have the flexibility to award cash, stock, other Goldman securities or "other property" under the plan, the bank said.
Goldman's compensation committee approved the new plan on December 17, the firm said in a filing with securities regulators late Thursday.
Awards will be linked to a wide variety of performance measures and will come with a "clawback" provision that lets Goldman rescind the grant for misconduct. The bank can also take back money if an employee fails to properly analyze risk, or communicate potential risk to others.
Goldman's new program comes as bankers around the world prepare for their annual bonuses to drop. A Reuters/IFR global poll shows bankers expect their bonuses to decline 7 percent this year, on average, from 2009.