Goldman explains $16.7bn bonuses to its shareholders

Investment bank Goldman Sachs has been meeting with shareholders in an attempt to defuse a backlash from investors over $16.7bn in bonus payments reported to have been set aside for the first nine months of this year - a period during which the US economy was still in recession.

Goldman has suffered bad press in recent months, with stories ranging from the bank jumping the queue for swine flu injections to a report this week that its staff were buying guns to defend themselves from public outrage at bonuses.

The move to mollify shareholders would suggest that the bank, which received $10bn of US government aid during the banking bail-out in 2008 before paying it back this year, is taking the criticism seriously.

Its 55-year-old CEO Lloyd Blankfein (above) first addressed the compensation issue at the company's annual shareholder meeting in May, and now a 14-page memo has been posted on the firm's website.

The document acknowledges disquiet among investors, but claims that "Goldman Sachs' compensation framework aligns the interests of our employees with the long-term interests of our shareholders". Amid reassurances that individuals are not being encouraged to take excessive risks with the firm's capital, it emphasises that "by tying compensation to performance, GS incentivises employees to create long-term value for our shareholders".

Payments to staff remain the largest single cost at the bank, with bonuses making up two-thirds of the compensation bill. The $16.7bn pay-out announced in October shows how much Goldman Sachs has bounced back since last year's crash - its share price has almost doubled this year alone.

But the bank should be in no doubt that public opinion across the world is still firmly set against them and their rival institutions.

Britain's minister for the City, Lord Myners, today demanded that bankers "come back into the real world" after three Royal Bank of Scotland directors threatened to resign over having their bonuses blocked by the Government.

Highlighting the 5,000 British bankers who are expected to receive £1m pay-outs this year, Myners, a former director at NatWest, said there was "precious little evidence" that bankers appreciated "the concern about these extraordinary levels of income". ·