Dive Brief:
- Goldman Sachs cut CEO David Solomon's annual compensation by $10 million, or 36%, to $17.5 million as part of a penalty for the bank's involvement in the 1MDB scandal, the bank said Tuesday in a filing.
- John Waldron, Goldman's president and chief operating officer, and Stephen Scherr, the bank's CFO, also saw their 2020 compensation slashed by $6 million and $7 million, respectively, to $18.5 million and $15.5 million. The moves follow through on an October pledge by the bank to claw back $174 million in compensation from current and former executives, which The Wall Street Journal said included a total of $31 million this year from Solomon, Waldron, Scherr and Goldman's head of international business, Richard Gnodde.
- The clawbacks come after a year in which the bank saw its revenue grow 22% to $44.6 billion, its highest level since 2009, the Journal reported. Meanwhile, Goldman's spending per person on compensation increased 2% last year, according to Bloomberg.
Dive Insight:
Despite the clawbacks, Goldman, in its filing, called the executives' performance "outstanding." The bank embarked last year on a $1.3 billion cost-cutting mission, which involved thinning layers of management and trimming the number of staff on whom it bestows the vaunted title of partner. It also set out in October to shrink its workforce by about 400 jobs.
"While none of Messrs. Solomon, Waldron or Scherr was involved in or aware of the firm's participation in any illicit activity at the time the firm arranged the 1MDB bond transactions, the Board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm," Goldman said in its filing.
Were it not for the 1MDB penalty, Goldman would have left Solomon's 2019 compensation of $27.5 million unchanged — aligning Goldman's stance with that of competitor JPMorgan Chase, which last week kept CEO Jamie Dimon's compensation, $31.5 million, at its 2019 level. Goldman's closest rival, Morgan Stanley, gave its CEO, James Gorman a 22% raise to $33 million in total compensation, that bank reported Friday.
In 2019, it was Goldman that broke ranks to give Solomon a nearly 20% pay raise in his first full year at the bank's helm.
Solomon's 2020 compensation package breaks down to a $2 million base salary, a $4.65 million cash bonus and a $10.85 million in performance-based restricted stock units.
Other big U.S. banks such as Bank of America, Citi and Wells Fargo have yet to report their executive compensation levels for 2020. Bank of America in 2019 paid CEO Brian Moynihan $26.5 million. Citi paid CEO Michael Corbat $24 million. Wells Fargo CEO Charlie Scharf took in $36.4 million in 2019 compensation, S&P Global reported, in part because of a "make-whole award" meant to replace the value of equity compensation he gave up by leaving the top post at BNY Mellon.
Goldman agreed last year to pay more than $5 billion to settle allegations that three of its business units helped "dishonestly misappropriate" $2.7 billion from the sale of bonds in 2012 and 2013 to investors in a Malaysian development fund, 1MDB. The bank collected roughly $600 million in fees by helping the Malaysian government drive $6.5 billion in investment into the fund, but some of that money was allegedly used to bribe officials. Former Malaysian Prime Minister Najib Razak was sentenced to 12 years in prison in connection with the scandal. Two Goldman bankers, Tim Leissner and Roger Ng, also faced prosecution for their roles in the matter.
