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Goldman Sachs executive praises bonus culture as 'good for society'

The vice chairman of Goldman Sachs International has said that the investment bank should not be ashamed of paying out large bonuses to its staff and that pay inequality helps society to become more prosperous.

His comments came a week after it was reported that Goldman Sachs is planning to reward its 30,000 members of staff with average end-of-year bonuses of $500,000.

The company has already set aside a bonus pot of almost $17 billion for staff in the first nine months of 2009, a figure that is expected to pass the $20 billion mark during the next quarter.

Goldman Sachs International vice chairman Lord Griffiths, who was one of former UK prime minister Margaret Thatcher's special advisors, told an audience in London that high pay for top financial employees created much-needed wealth for the whole economy.

"We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," he said.

In a discussion on morality in the marketplace, held in St Paul's Cathedral, Lord Griffiths said that attempts to curb bonuses would simply encourage top organisations to move their operations to countries with fewer constraints on remuneration for bankers, such as Switzerland or the Far East.

UK chancellor Alistair Darling has come out in opposition to Lord Griffiths's remarks, using a speech this lunchtime to attack Goldman Sachs's bonus plans for its staff.

"What happened with Goldman Sachs last week sends the wrong signals," he said, adding that he had spoken to UK banks to tell them they would not have survived without the massive taxpayer bailouts that have taken place during the global financial crisis.

Last week, Goldman Sachs was among nine global banking institutions which signed up to an agreement to curb bonuses for its UK staff.

But the regulations, which were proposed by the G20 last month, will not come into force until 2010.

By Asim Shah