Lloyd Blankfein’s decision not to take an annual bonus for 2008, along with other senior executives at Goldman Sachs, surely closes the door on big bonuses for top investment bankers across the industry this year.

Given that Goldman has performed better than any other big investment bank - and than many smaller ones - during the financial crisis, it would be perverse for others to try to force open the door that has been slammed by Mr Blankfein. Indeed, UBS has already fallen in line with Goldman.

Defying the precedent would be risky in various ways. Citigroup’s disclosure this morning that it will cut 50,000 jobs as part of an effort to slash its cost base by 20 per cent shows how much the sector is suffering. That makes largesse at the top tactless.

Apart from this, many banks have had to be bailed out by their national governments - and even Goldman was cajoled into taking an investment from the US government - so there will be intense scrutiny of bankers’ pay.

None of this is rocket science and I doubt whether other banks will be naive enough to pay their most visible executives lots of money this year.

This does, however, leave open the question of what happens next year. I imagine that most banks will attempt, in some form or other, to return to tradition in bonus-giving. Whether they get away with it - or whether shareholders, governments and the general public will keep restraining them - remains to be seen.

November 17, 2008 4:47pm in Finance | Comment