02/29/2012 03:15 pm ET Updated Mar 01, 2012

E. Gerald Corrigan, Goldman Sachs Director, Favors Pay For Performance

While many Wall Streeters are crying poor -- "people who don't have money don't understand the stress," an accounting firm partner tells Bloomberg -- one long-time financier says he’s okay with the recent decline in banker pay.

"The compensation rates have gone down," said E. Gerald Corrigan, a partner and managing director at Goldman Sachs, who told The Huffington Post that the current trend of tying pay to performance and compensating bankers in stock instead of cash is good for the industry. Corrigan, a former president of the Federal Reserve Bank of New York, applauded in particular the increasing use of clawbacks -- the practice of paying out full bonuses only if a firm as a whole performs well.

"You might have a good year one year, but the next year turns out to be a bad one, and the employer can claw back the stock you got paid in," said Corrigan after delivering a keynote speech on Tuesday at the Global Association of Risk Professionals conference in New York, a trade meeting for finance professionals. That, he said, is a positive development, and one that hearkens back to an earlier time in the industry, when pay was much more closely tied to how a firm fares.

Critics of pre-crisis pay had argued that financiers had little incentive to blunt the risk posed by their deals because much of their compensation came from cash bonuses not linked to their company's long-term performance. So, a broker in 2006 might have received a substantial payout for short-term profits from mortgage-backed securities, even if they presented great risks for the bank and the broader financial system over the longer run.

The divorce of firm performance from banker compensation is a relatively recent phenomenon, according to journalist William D. Cohan, author of "House of Cards" about the fall of investment bank Bear Sterns and another speaker at the conference on Tuesday. Prior to the 1970s, many Wall Street firms, including Goldman Sachs, had partnership structures whereby bank executives were personally invested in the firm's financial future, making them less likely to make risky investment decisions since ultimately their own money was at stake, Cohan said.

But for those wondering whether the new performance-based changes to compensation might herald a return to Wall Street's relatively conservative old days, Corrigan thinks not. "It's not the same as the old-time partnership structure," he said. "There's no question about that."

Part of what's driving the return to a more conservative pay scheme these days are new restrictions on how banks can invest -- and therefore compensate employees -- borne out of the Dodd-Frank financial reform legislation of 2010.

The new trend is not universally beloved by Wall Street bigwigs. In a separate discussion at the risk conference, Morgan Stanley's managing director, Kenneth Abbot, said, "There are huge chunks of this [legislation] that are here to stay, and we have to get used to it," He added, "There are questions about what happens if we get a Republican administration. That might be nice but I'm not going to hold my breath."