Goldman pay: out of step
Even among other top Wall Street banks, David Solomon’s 2019 pay rise stands out
It ranks as one of the clumsier moments in recent corporate history. Last month, Goldman Sachs disclosed it had awarded chief executive David Solomon a near 20 per cent pay rise. His $27.5m compensation package makes him Wall Street’s second-best paid bank boss after JPMorgan Chase’s Jamie Dimon.
Executive pay is a thorny subject in the best of times. But Goldman’s announcement, coming in the middle of a global pandemic, is particularly prickly. Millions of Americans are suddenly without a job. Businesses are going under. Bosses from companies hard hit by the public health crisis have been either taking pay cuts or forgoing salaries all together.
Proxy advisers such as Institutional Shareholder Services can be criticised for their cookie-cutter approach to corporate governance. But ISS is right to take Goldman to task. It is recommending investors cast advisory votes against the pay of top executives at the bank.
Even among other top Wall Street banks, Mr Solomon’s 2019 pay rise, which includes a $7.65m cash bonus, stands out. Neither Bank of America’s Brian Moynihan nor Citigroup’s Mike Corbat received a compensation bump. James Gorman at Morgan Stanley actually took a 7 per cent pay cut despite the bank posting record profits last year. At industry leader JPMorgan, Mr Dimon received a rise of just 1.6 per cent, even though he runs a vastly bigger outfit that made four times more in profit last year.
Goldman says compensation for 2019 reflects the “significant achievements” of its executives. The numbers tell a different story. Net earnings at Goldman declined 19 per cent in 2019 amid a surge in litigation charges related to the 1MDB scandal. Revenue fell. Both its investment banking and investment management units struggled. Another key metric — return on equity — came in at just 10 per cent for the year. That is well below the 15 per cent recorded by JPMorgan, which also posted record profits for 2019.
Since taking the helm, Mr Solomon has spearheaded efforts to rehabilitate a corporate reputation rightly or wrongly associated with a Machiavellian form of capitalism. Permitting executives to rake in hefty bonuses at a time of world economic stress undercuts that effort.