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Goldman Sachs’ hefty bonuses of $80 million each for CEO David Solomon and President John Waldron are causing a stir, with advisory firm Glass Lewis advising shareholders to vote against these awards. The recommendations were outlined in a report released last Friday, criticizing the departure from Goldman’s usual practice of performance-based equity awards.
These bonuses, set entirely in stock, lack performance conditions, according to the advisory firm. While the media has been buzzing about talent poaching at Goldman, shareholders have largely been kept in the dark with generic statements justifying these payments, Glass Lewis noted.
“The lack of transparency regarding such significant awards is troubling,” the report stated, advocating for shareholders to vote against the proposal.
Goldman’s idea behind the bonuses, which have a five-year retention period, was to ensure both Solomon and Waldron continue at the firm. Waldron’s award, in particular, has fueled speculation that he may eventually succeed Solomon.
Separate from their annual pay, which was $39 million for Solomon and $38 million for Waldron last year, these bonuses surpass the compensation packages of JPMorgan and Morgan Stanley’s chief executives.
Internally, Goldman executives have been worried that investors might reject the say-on-pay vote at their upcoming annual general meeting in Dallas on April 23, insiders have shared.
Goldman, with major investors like Vanguard, BlackRock, and State Street, defended its decision: “The intense competition for talent necessitates retaining our leadership team, ensuring firm momentum and a robust succession plan. A full stock-based grant is well-aligned with long-term shareholder value.”
Although the advisory vote was introduced as part of the Dodd-Frank financial reforms and isn’t binding, a negative vote would publicly censure the bank.
Investor pushback on executive pay at US banks is uncommon. However, JPMorgan Chase faced such a situation when shareholders objected to a $50 million special award for CEO Jamie Dimon in 2022, leading the bank to refrain from offering him similar awards in the future.
Support for Goldman Sachs’ executive pay has dwindled from 94% to 86% within a year. Glass Lewis has also cautioned shareholders about a new carried interest pay scheme for executives, criticizing the plan’s complexity for making it difficult for shareholders to evaluate pay structures before the issuance of bonuses.
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