Goldman Sachs recently admitted that it conspired to violate the Foreign Corrupt Practices Act’s (FCPA’s) anti-bribery provisions.  It agreed to pay a significant monetary fine and to enter into a deferred prosecution agreement.  These sorts of resolutions are common when companies are charged with violating the law.  But Goldman did something that is not common: it clawed back or reduced compensation for senior executives not directly involved in the wrongdoing.  It clawed back some amounts paid to senior executives during the time the misconduct was occurring, and it reduced 2020 compensation of present top management.

Richard Painter and I wrote our book, Better Bankers, Better Banks: Promoting Good Business Through Contractual Commitment, in the wake of the 2008 financial crisis, a crisis we argued reflected excessive and irresponsible financial and legal risk-taking by bankers and banks.  We traced the cultural shift that began several decades before the crisis as investment banks, then general partnerships in which the partners had personal liability for their banks’ debts and obligations, became corporations with liability limited to that of the corporation itself, not its owners.  Liability is legal responsibility, but we argued that it was something more—moral responsibility.  We argued that banks and their most highly-compensated bankers should enter into agreements in which the bankers accepted personal responsibility—that is, monetary liability—should there be dramatic problems at their banks, such as insolvency or the imposition of fines or judgments.  These bankers would be liable should their banks become insolvent, up to a certain amount of their assets.  The liability for fines and judgment would take the form of clawbacks from past, present and future compensation. Importantly, the agreements would provide for liability without regard to fault: they would reflect, and encourage, “responsibility” in its colloquial understanding, as attaching to someone who was chargeable with preventing the problematic conduct at issue.  In our view, this would provide an incentive for top bankers to “take responsibility” and foster a culture and ethos that would minimize the potential harm caused by banks. Since the 2008 crisis, and since we wrote our book, there have been many more examples of problematic bank behavior; the resultant harm has been significant.

The Goldman FCPA Violations

An example recently in the news involves bribes paid by Goldman Sachs. Goldman “admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes.” In addition to a $2.9 billion fine, Goldman entered into a Deferred Prosecution Agreement. A Goldman subsidiary also pleaded guilty to conspiring to violate the anti-bribery provisions of the FCPA.

Individuals involved in the scheme were also charged. Tim Leissner, a former Goldman managing director, pled guilty to conspiring to violate the FCPA and to commit money laundering and agreed to pay sizable fines and forfeit $43,700,000, which he received in connection with his participation in the bribery scheme.  As he acknowledged, the crimes to which he pled guilty can carry lengthy prison terms; he’ll be sentenced in January of 2021.  Two other individuals, another Goldman managing director (Ng Chong Hwa) and another (non-Goldman) individual who worked as an intermediary, were identified and charged criminally by the U.S. Department of Justice (DOJ); the former was extradited and will be tried, and the latter is a fugitive from justice. Another Goldman senior executive, Andrea Vella, was involved as well, and the Federal Reserve has barred him from the banking industry as a result of his participation in the bribery scheme.

Goldman initially tried to blame rogue staff. A New York Times article reported that Lloyd C. Blankfein, Goldman’s chairman and former chief executive, said, in remarks on the sideline at a conference: “These are guys who evaded our safeguards, and lie. Stuff like that’s going to happen.”

But now, Goldman seems ready to acknowledge a deeper problem. Beyond their own admissions, entry into a DPA, and payment of a considerable fine, they are going further, not just as to the employees involved, but as to senior management of Goldman.  Goldman clawed back $76 million from the employees involved, Tim Leissner, Ng Chong Hwa, and Andrea Vella, as allowed under its contracts with them, and also clawed back from or reduced compensation of senior executive officers who were not involved.  In its press release relating to the settlement, Goldman explained that:

in acknowledgement of the Firm’s institutional failures, five of the Firm’s former senior executive officers . . . will, to the extent not already paid, forfeit all or the majority of their outstanding Long-Term Performance Incentive Plan Awards [related to the years when the transactions were occurring] . . . , and forfeit a portion of other previously awarded compensation, if applicable. One of these retired senior executives who previously received the 2011 award has voluntarily agreed to return the majority of it. . . . The amounts . . . total approximately $67 million.

In the same press release, Goldman also announced reductions to the 2020 compensation of “the current executive leadership team, the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as well as the current CEO of Goldman Sachs International,” by $31 million. In the aggregate, all of the clawbacks, forfeitures and compensation reductions total approximately $174 million.

Goldman’s considerable fine is effectively being paid by shareholders.  It’s been said that these sorts of fines are regarded by firms as costs of doing business—costs borne by others, and therefore in a sense acceptable.  By contrast, the costs of clawbacks and compensation reductions will be borne by Goldman’s own decision-makers—those who do, and should, bear responsibility.

Takeaways from Goldman’s Clawbacks and Compensation Reductions

Good news, seemingly.  And, I hope, a harbinger of banks’—and bankers’—greater acceptance of responsibility.  Cynics might argue that the amounts may be low relative to what the senior executives are retaining.  Maybe, but at these levels, the money isn’t about increased (or decreased) consumption—it is more about “points,” increases or decreases from the previous “score.”  Furthermore, should this practice continue in the future, it’s not as though the amounts at issue will be taken away secretly.  The impetus for the reduction will surely be public, and should carry with it an assessment that the reduction was warranted.

Cynics might also argue that these kinds of clawbacks, forfeitures and compensation reductions are largely discretionary, done because the bank at issue decides to do so.  But the flip side is that discretion is amenable to pressure.  We can worry about whether the pressure will be perfectly principled—whether shareholders, regulators, the media, or other commentators will push for what they “should” push for. I’d argue, though, that more responsibility is better, even if the rank ordering is not perfect, and that the precedent, with its salience, is a very good one.  Indeed, the specter that clawbacks, forfeitures, and pay reductions are possible should something seem “bad” enough to warrant them strikes me as preferable to a narrower specification, such as clawbacks triggered by financial restatements that, post-financial crisis, have increasingly been required by firms. It’s hard to know how much of a deterrent effect these restatement-triggered clawbacks have had—for all we know, there might have been many more scandals without them—but there is still far too much problematic and in some cases criminal bank conduct. More is needed.


Richard Painter and I sought in our book to identify and highlight the problem of lack of responsibility on the part of banks whose conduct contributed to the 2008 financial crisis.  While I think a contractual arrangement of the sort we advocated in our book, especially as to clawbacks and reductions of compensation for fines and settlements, would better address the problem than a post-hoc response like Goldman’s, what Goldman has done makes me optimistic for more of a convergence between what’s good for a bank and what’s good for society.

Claire A. Hill is the James L. Krusemark Chair in Law at the University of Minnesota Law School.


The views, opinions and positions expressed within all posts are those of the author alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity of any statements made on this site and will not be liable for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with the author.

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