Even the CEO of Goldman knows…

Good morning everyone! I hope Labor Day was relaxing and rejuvenating for each of you.

The Chairman and CEO of Goldman Sachs, Lloyd Blankfein, made some noteworthy comments in Frankfurt regarding investment bank compensation. He said that anger about ridiculous and outsized bank pay packages was “understandable and appropriate.” Blankfein also called for an entire ban on multi-year guaranteed employment contracts. Hallelujah.

The CEO impressively went on to state:

“No one should get compensated with reference to only his or her own [profit and loss]…Compensation should encourage real teamwork and discourage selfish behavior, including excessive risk taking, which hurts the longer term interests of the firm and its shareholders.”

Note that these comments are very similar to postings that have been made on our little corner of the Internet for almost a year now. Underlying the collapse of the financial system, as well as being the seeds of the recession, were two main problems: lax regulation and poor compensation practices. Kudos to the storied investment banking firm, Goldman Sachs, for initiating changes within its own firm.

Also impressively, Blankfein called for a change in accounting standards and regulatory structures that would better allow regulators to understand the systemic risks in the financial system. Hallelujah. The Goldman CEO also called for regulators to better coordinate their activities and to avoid turf wars.

It is my sincere hope that Blankfein’s public declaration of, and support for increased standards will lead to a national and international dialogue about financial system reformation. At this critical juncture the legislative interest in these kinds of changes is waning. The public interest is almost nil. The business interest in such changes is antagonistic. Yet, the financial crisis and recession we have just gone through will happen again without structural changes. Ugh!

Be well and be aware!

Jason