Dive Brief:

• Proxy adviser Glass Lewis is recommending shareholders vote down, at Goldman Sachs’ annual meeting April 28, a pay proposal that would give the bank’s CEO, David Solomon, and president, John Waldron, one-time stock incentives estimated at $30 million and $20 million, respectively.
• Goldman offered Solomon and Waldron the incentives in October to "ensure leadership continuity" at least through 2026, the bank wrote in a Securities and Exchange Commission (SEC) filing. While 2021 became a record revenue year for Goldman, the bank’s stock has not performed as robustly since last fall — dropping 24.3% through Monday, from a Nov. 2 closing of $423.85, according to Yahoo Finance.
• "Such awards have the potential to undermine the integrity of a company’s regular incentive plans, the link between pay and performance or both," Glass Lewis said Friday in a report to clients seen by Bloomberg and the Financial Times. "We believe that long-term incentives should encourage executives to achieve steady and sustainable growth rather than what may amount to relatively brief spikes in performance."

Dive Insight:

Shareholder votes are nonbinding but may herald coming change, given enough support. A shareholder proposal last year that would have forced Goldman to publish a report on how mandatory arbitration affects its staff and workplace narrowly failed, with 49% backing, and the bank rejected it. But Goldman reversed course in June, agreeing to review the issue.

Likewise, Citi agreed in October to undergo a racial audit, months after a shareholder proposal on the matter garnered 38% support.

Goldman isn't the only large U.S. bank this proxy season to face pushback. Institutional Shareholder Services on Tuesday recommended Wells Fargo investors vote against compensation deals for that bank’s CEO, Charlie Scharf, and other leaders, saying it wasn’t entirely transparent how their pay rates were determined, according to Reuters. Just 57% of investor ballots last year backed Wells Fargo's 2020 compensation packages.

Solomon’s incentive encompasses 73,264 restricted stock units that, based on Goldman’s $409.48-per-share October trading value, would net him roughly $30 million in October 2026. That value could top out at more than $50 million, however, if the stock price were to climb to $717, alongside a $2 quarterly dividend. 

The bank, though, didn’t stop at giving incentives to its top two officers. It bestowed similar but smaller one-time perks in January on its approximately 400 partners. Like the moves to lock down Solomon and Waldron, the awards were meant as tokens to keep executives from jumping to competitors. They won’t figure into future compensation calculations.

Glass Lewis, for its part, said Friday it is "critical of the awards given their excessive sizes." It also bemoaned the awards’ structure, which measures stock performance in rolling 30-day measurement periods over five years.

The proxy adviser on Friday gave Goldman’s executive compensation practices a C rating, saying Solomon received "significantly more" than CEOs at peer companies and compensated its C-suite executives more generously. Solomon’s $35 million package for 2021 makes him the best-paid chief executive among the six largest U.S. banks, tied with Morgan Stanley’s James Gorman. 

Goldman, however, was not alone last year among banks handing out large-haul stock awards. JPMorgan Chase in July gave its CEO, Jamie Dimon, a 1.5 million-share option that could be worth about $50 million by 2031. The bank in December gave its president, Daniel Pinto, an award half that size, labeling the effort "retention planning."

Goldman declined to comment to The New York Times regarding Glass Lewis’ recommendation. In its proxy materials, the bank asserted the bonus plans help "drive long-term shareholder value creation."

About 94% of Goldman’s shareholders supported its pay plan last year, according to the Financial Times. 

The timing of the stock awards may be contributing to Glass Lewis’ objection. Goldman cut Solomon’s annual compensation by 36% nine months prior to giving him the stock incentive. That encompassed a $10 million clawback — part of a penalty for Goldman's involvement in the 1MDB scandal. Waldron, too, saw some of his pay clawed back.

In contrast to Goldman’s recent stock drop, the Solomon era, dating to late 2018, has been a boom. The bank’s stock price saw an 80% jump between October 2018 and the same month in 2021, according to the Financial Times.

The C rating Glass Lewis gave Goldman’s compensation in 2021 hardly represents its harshest mark. The proxy adviser gave the bank an F in the category in 2019, citing a "significant disconnect" between Goldman’s pay and its performance, according to Bloomberg.