Many questions have trailed the new Goldman Sachs CEO salary. Despite the fact that the group remains one of the topmost investment banking and financial services firms in the US and indeed the world, many skeptics aren’t satisfied with the salary the Chairman and CEO, David M. Solomon receives. Although he is a seasoned investment banker with many years of experience (over 40 years) in both mainstream and investment banking and has held important positions at Goldman Sachs, many argue that he’s quite new in his position at top job at Goldman Sachs Group Inc. and as such, the company shouldn’t have handed him such an offer. He became the CEO on the 1st of October, 2018. Another argument was that the company should have waited a year or more before the pay rise to cushion the effects of the legal battles Goldman Sachs faced in 2020.
The major opponent to this pay rise is the topmost American proxy advisory services company, Glass Lewis & Co. They argued that only a part of the proposed Goldman Sachs CEO salary was included in last year’s summary compensation total. The advisors also stated that the pay rise would alter and undermine the integrity of the company’s incentives system. Solomon and John Waldron, the President and Chief Operating Officer of the bank, were further accused of paying themselves like private equity chiefs. Yet, the board would have none of these and the Goldman Sachs CEO salary was reviewed upwards.
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The Goldman Sachs CEO salary was increased to $35 million recently. With this mega salary bump, David M. Solomon joins the likes of Jamie Dimon of JPMorgan Chase, Brian Moynihan of Bank of America, James Gorman of Morgan Stanley, and Charles Scharf of Well Fargo in the so-called “30 million club” which represents a group of top executives in the US banking and financial services sector earning above $30 million in total compensations. But, Solomon’s total 2021 pay package makes him the joint highest earner at US major banks. Both receive exactly $35 million as total take-home compensation.
David Solomon’s salary bounced back rather fast
It is noteworthy to state that this isn’t the first time the Goldman Sachs CEO salary was earning quite a large salary. David N. Solomon had before earned $27.5 million in total compensations for the 2019 fiscal year and was due to receive the same for 2020 before the 1Malaysia Development Bhd (1MDB) scandal. Goldman Sachs was accused of colluding with politicians and others to aid the looting of the country’s sovereign wealth fund corruption and a series of legal battles followed suit. Goldman Sachs finally agreed to wrongdoing and criminal misconduct in the scandal. After the whole dust settles, David Solomon took the fall and had $10 million removed from his pay to settle legal fees. With that, he was now left on a salary and total compensation of $17 million for 2020.
Despite his pay cut, Solomon wasn’t stopped from getting his other benefits and entitlements. He was handed about $30 million in performance-based stocks to help him cushion the effects of the crimp. The board justified this by stating in a securities filing at the time that they wanted to ensure Mr. Solomon retains his position at the top job for at least the next five years. John E. Waldron, Goldman Sachs’s second in command, was also handed a stock performance-based stock bonus of $20 million for the same reason.
In his capacity as the Chairman and CEO of Goldman Sachs, David Solomon earned $35 million in total compensation for the 2021 fiscal year. According to regulatory reports filed by the group’s board, $2 million of this fee was for Solomon’s base salary while the rest is in form of variable compensations. A greater chunk of these (about 70%) are in form of restricted stocks that vest when certain objectives are met. The breakdown of the payment includes $2 million in base salary (as stated earlier), $9.9 million in form of bonuses, $27.38 million as stock, and $264,892 in form of other types of compensation. It is important to note that majority of the stocks would vest in 2026.
In defending its decision, the board states that Solomon’s individual performance, leadership qualities, and drive contributed to the pay rise. They also stated that the company has enjoyed tremendous successes during the course of last year which is evident in the progress made on the company’s growth strategy.
Last year was a good one for Goldman Sachs. The bank recovered from the negative economic impacts of the coronavirus pandemic and recorded massive earnings for the year. The bank reported net revenue of $59.34 billion and a net earning of $21.64 billion, a massive growth when compared to the $9.46 billion in net income made in 2020. There was a favorable performance in the last quarter of the year as the bank had net revenues and net earnings of $12.64 billion and $3.94 billion. It also says a 23% increase in operating expenses for the fourth quarter as it rose to about 23% due to benefits and higher compensation costs.
The investment banker got off a shaky start in 2022 but is stabilizing its stand. Goldman Sachs shares went down by 9.3%, unlike the S&P companies whose shares fell by 7%. The bank’s shares were trading for $7.73 per common share as of the second quarter of the year. But going by the antecedents of Goldman Sachs’ CEO, recovery and growth are inevitable.
David Solomon took over in October 2018
David M. Solomon took over the reins of leadership of the large US bank 4 years ago. He eventually became the CEO of Goldman Sachs after Lloyd Blankfein resigned the same year. Solomon was second in the line hierarchy. There were speculations that Harvey Schwartz, Goldman Sachs’ president and co-chief operating officer at the time, was to succeed Blankfein at the top job. But, fortune smiled at Solomon as Schwartz retired in March 2018 leaving Solomon as the sole successor. Lloyd Blankfein had no reservations about this and gave the nod for Solomon to take over the mantle of leadership.
David Solomon brought in some sweeping reforms upon taking over. He lowered the company’s weekly man-hours from 90 to around 70 – 75. The only exception to this is when there are deals to be pursued and closed. He seeks to further diversify the bank’s sources of revenues while making a shift from capital market-related revenue streams to mainstream wealth and asset management and customer banking.
When he assumed office, the Goldman Sachs CEO salary was placed at $27.5 million which he earned for the next two years before the scandal of 2020. This was a great increase from the total compensation at his former position where he received $11.85 million in compensation. Solomon has also gathered a good number of financial instruments in Goldman Sachs over the years. As of January 2018, it was estimated that his shareholdings (224,030 units representing 0.059% of the bank’s shares) are worth over $58 million. The value is sure to increase as David Solomon looks to stay at the bank for more years and add to her growth and development.