March 25, 2023

DealBook: Goldman Retreats From Plan to Award Bonuses Later in Britain

Mervyn King, the governor of the Bank of England, criticized banks that were considering paying bonuses later than usual.Brendan McDermid/ReutersMervyn King, the governor of the Bank of England, criticized banks that were considering paying bonuses later than usual.

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 benefit from a lower income tax rate.

The decision was made 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 scheduled to report fourth-quarter earnings on Wednesday and usually announces the size of the annual bonuses to its staff soon afterward.

Even the consideration of such a move had threatened to become another public relations problem for the banking industry. Top executives had pledged to try to improve their reputations, which were 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 company typically makes such awards. The move helped the executives avoid the higher marginal tax rates that will now be imposed on income of $450,000 or more.

Mervyn King, the governor of the Bank of England, told a parliamentary committee on Tuesday morning that even though a delay in bonus payments was not illegal, 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.”

Sajid Javid, a Treasury minister in Britain, called Goldman Sachs this week to urge it not to delay the payments, a person briefed on the discussion said.

The offices of Goldman Sachs in London in 2010.Toby Melville/ReutersThe offices of Goldman Sachs in London in 2010.

The British government announced last year that it would scrap the 50 percent top tax rate for income above £150,000, or about $238,000, which was introduced by the last Labour government to help reduce the budget deficit. George Osborne, the chancellor of the Exchequer, had called the tax “cripplingly uncompetitive” because it cost jobs and did not raise any money.

A spokeswoman for Goldman Sachs declined to comment.

Mr. King said that investment bankers were privileged because a lot of their compensation was made up of bonuses, which the banks can decide to pay whenever they want. But he also said that delaying bonuses to benefit from the coming 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 good will from the rest of society,” he said. “They can’t just exist on their own.”

Earlier, several Labour Party politicians criticized the banking industry for considering a delay of bonus payments. John Mann, 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. An earlier version also misstated the currency conversion that would apply to the 50 percent top tax rate for income. The tax rate applied to incomes above £150,000, or about $238,000, not $181,000.

Article source:

Bits Blog: Twitter Changes Lead to Online Protests

Twitter’s new rules for third-party developers have spurred an online uproar.

After the company imposed stricter rules for its application programming interface, or A.P.I., on Thursday, engineers and developers picked up their virtual pitchforks and took to Twitter and blogs to decry what some described as a “bait and switch.

“Twitter looks a lot like the big star who forgot about all the little guys that helped it get to the top,” Rafe Colburn, an engineer at Etsy, wrote in a blog post.

The influential Instapaper creator Marco Arment was more direct in his criticism: “Twitter has proven to be unstable and unpredictable and any assurances they give about whether something will be permitted in the future have zero credibility. I sure as hell wouldn’t build a business on Twitter.”

Mr. Colburn, Mr. Arment and others took issue with the company’s new user cap, which limits Twitter’s third-party apps from accommodating more than 100,000 users, or growing beyond 200 percent of their current user base. Another point of contention was a rule that forbids third-party apps from weaving chronological tweets with content from other networks — a big headache for apps like Flipboard, which mix tweets with content from Facebook, blogs and publications and other sources.

Those conditions were greeted with a contempt typically reserved for investment bankers around bonus season: “Wall Street has a saying that applies to Twitter’s new A.P.I. policy: “Bears make money, bulls make money, but pigs get eaten,” tweeted Joel Spolsky, a co-founder of Fog Creek Software.

“This morning Twitter feels like your favourite band that has sold out to a major record label,” wrote Ewan Spence, a contributor to

“Twitter, what kind of bird are you becoming? Are you still that cute little bird that everyone loved, or are you becoming a scary bird of prey?” wrote Nova Spivack, the chief executive of the start-up, who compelled people to sign his petition, #OccupyTwitter.

Some developers tried to quell outrage pointed toward Twitter. Tapbots, the maker of Tweetbot, a popular Twitter app, said in a company blog post that the response to the A.P.I. changes seemed overblown. “There’s been a lot of fear, uncertainty and doubt generated by Twitter’s latest announcement,” the company wrote. “I wanted to let everyone know that the world isn’t ending.”

Others said such changes were par for the course when working with the data that large social networks provide. Bradford Cross, the co-founder of Prismatic, a social news aggregation Web site, said that while Twitter and other social networks could be hard to work with, “You’re getting the lowest distribution cost in history, lots of great data that you can create value from and you’re getting a more intimate connection to people.”

“It is going to be a Wild West for a while — social network wars, platform dodginess, media business turmoil and back-channel deals,” Mr. Cross added.

Many described Twitter’s changes as inevitable, particularly as the company struggles to find a viable business model. Twitter has experimented with various revenue streams like sponsored tweets and advertising. But its revenue — eMarketer estimates Twitter will make $260 million this year — pales in comparison to that of Facebook, which generated a substantial chunk of its $3.7 billion in revenue last year from its profit-sharing arrangement with third-party apps like Zynga.

But that explanation did not square with Twitter’s most vocal critics, like Mr. Spivack, who outlined alternative ways Twitter could generate revenue by keeping its A.P.I.’s open.

“Various apologists for Twitter attempt to justify it because ‘Twitter needs to be a multibillion-dollar business,’” Mr. Spivack wrote. “These kinds of statements just don’t hold water and are completely misguided.” He added, “The future market cap of the company will ultimately be orders of magnitude greater if they are stewards of the open nervous system of the planet than if they are the next Myspace trying to sell ads on their own pages and apps. It’s really that simple.”

Article source:

Off the Shelf: Lessons in Communication, for Newspapers Themselves

Rarely will you see displays of this divide more vivid than in James O’Shea’s new book, “The Deal From Hell: How Moguls and Wall Street Plundered Great American Newspapers” (PublicAffairs, $28.99).

The subtitle seems misleading, as do so many these days. Mr. O’Shea, a onetime top editor at both The Chicago Tribune and The Los Angeles Times, tells the story of these two papers’ magnificently botched corporate marriage — a fine tale, though from the subtitle it would appear that his publisher didn’t want to market it as such, perhaps thinking that no one much cared.

And the publisher is probably right. Many Americans may worry deeply about presidential elections, hurricanes and other major news, but I suspect that they care far less about the slow degradation of the newsrooms that provide it.

It’s just as misleading to suggest that the current troubles of “great American newspapers” result from being “plundered” by “moguls and Wall Street.” It’s true in some cases — and Mr. O’Shea trots out some splendid examples.

As evidence of Wall Street’s attitude toward newspapers, the book describes a JPMorgan Chase vice president being congratulated by a colleague for securing the oh-so-profitable task of restructuring The Tribune’s corporate parent. The V.P. responds by e-mail from Aspen: “Tnx dude. Can you say ka-ching?” Next time I hear an investment banker ask in exasperation why the public so hates Wall Street and its minions, I’ll point him to that exchange.

But it wasn’t investment bankers, no matter how irksome their behavior, who caused newspapers’ woes. It was, by and large, newspapers themselves, especially their managements, as Mr. O’Shea makes abundantly clear.

The abysmal state of newspapers today has largely been precipitated by the loss of classified advertising to Craigslist and other online sites; by the mass migration of readers to free online news sites; and, to a degree I hadn’t appreciated, the scandals in the early 2000s that revealed how thoroughly some newspapers had been misstating circulation numbers for years. Once those papers had to issue correct numbers, official circulations fell sharply, with a corresponding loss of credibility among major advertisers.

Mr. O’Shea argues that what’s killing newspapers isn’t the Internet and other forces, but rather the way newspaper executives responded to those forces: “The lack of investment, the greed, incompetence, corruption, hypocrisy and downright arrogance of people who put their interests ahead of the public’s are responsible for the state of the newspaper industry today.” Strong stuff, but Mr. O’Shea can back it up.

The problem, however, goes deeper than that. For years, most large American newspapers were owned by families — the Grahams in Washington, the McCormicks in Chicago, the Chandlers in Los Angeles — but as those families grew and spread, their far-flung members sought greater returns. Beginning in the 1960s, many of the companies began going public, and therein can be found the underlying problem.

The demands placed upon publicly held companies — more profits, a higher stock price — cannot easily be reconciled with the demands of quality journalism, which needs more people and higher salaries than a cut-rate alternative. When newspapers faced any kind of challenge, whether from the Internet or higher newsprint costs, the answer has long been to cut costs, which leads inevitably to lower-quality journalism.

“The Deal From Hell” is chockablock with examples of what happens when bean counters take over newspapers. In the mid-1990’s, Mark Willes, a former General Mills executive, became C.E.O. of Times Mirror, then the parent of The Los Angeles Times. The book describes Mr. Willes bringing in consultants who held a meeting so that executives could literally sniff the paper; they felt that declining circulation might be caused by newsprint that smelled like fish. And this happened even before the Tribune Company bought Times Mirror in 2000.

Article source: