LONDON – Goldman Sachs decided on Tuesday that it would not delay the payment of bonuses to its staff in Britain, a move that would have helped investment bankers and other highly paid employees to benefit from a lower income tax rate.
The decision came as lawmakers criticized banks that were considering paying bonuses later than usual. The top tax rate in Britain is scheduled to drop to 45 percent, from 50 percent, on April 6.
Goldman Sachs’s compensation committee had considered delaying the bonus payments but decided at its meeting on Tuesday not to proceed, said a person with direct knowledge of the decision, who declined to be identified because the meeting was not public. Goldman Sachs is due to report fourth-quarter earnings on Wednesday and usually announces the size of the annual bonuses to its staff shortly afterward.
Even the consideration of such a move had threatened to turn into another public relations problem for the banking industry, whose top executives had pledged to try to rebuild their reputations tarnished by the financial crisis. Goldman Sachs was already drawing scrutiny in the United States after it distributed $65 million in stock to 10 senior executives in December instead of January, when the firm typically makes such awards. That move helped the executives avoid the higher tax rates that will now be imposed on income of $400,000 or more.
Mervyn King, the governor of the Bank of England, told a parliamentary committee on Tuesday morning that even though any delay in bonus payments was not against the law, it was “a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it.”
A Treasury minister in Britain, Sajid Javid, called Goldman Sachs this week to urge the firm not to delay the payments, a person briefed on the discussion said.
The British government announced last year that it would scrap the 50 percent top tax rate for income above £150,000, or $181,000, which was introduced by the last Labour government to help plug the budget deficit. The chancellor of the Exchequer, George Osborne, had called the tax “cripplingly uncompetitive” because it cost jobs and failed to raise any money.
A spokeswoman for Goldman Sachs declined to comment.
Mr. King said that investment banks were privileged because a lot of their compensation was made up of bonuses, which they can decide to pay whenever they want. But he also said that delaying bonuses to benefit from the upcoming tax cut “would be rather clumsy and lacking in care and attention to how other people might react.” “In the long run, financial institutions, like all large institutions, do depend on goodwill from the rest of society,” he added. “They can’t just exist on their own.”
Earlier, several Labour Party politicians had criticized the banking industry for considering a delay of bonus payments. John Mann, a member of the Labour Party, said such a step would be an “opportunistic money grab,” The Financial Times reported on Monday.
This post has been revised to reflect the following correction:
Correction: January 15, 2013
The headline on an earlier version of this article referred mistakenly to the timing of the bonuses awarded by Goldman Sachs in Britain. As the article correctly noted, the investment bank decided to award bonuses before the tax rate is adjusted on April 6, not after.
DealBook: Goldman Retreats From Plan to Award Bonuses Later in Britain
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DealBook: Goldman Retreats From Plan to Award Bonuses Later in Britain
