Thursday, May 19 2022

Dive brief:

  • Goldman Sachs is giving one-off, stock-based incentives to its two top executives to “ensure leadership continuity” for at least the next five years, the bank said on Friday in a Securities and Exchange Commission (SEC) filing.
  • The bank gave CEO David Solomon 73,264 restricted stock units which, based on Goldman’s trading value of $ 409.48, would earn him around $ 30 million in October 2026. However, if the price of the stock was expected to climb to $ 717 – including a quarterly dividend of $ 2 – The bonus would peak at more than $ 50 million, according to the Wall Street Journal. John Waldron, the bank’s president and chief operating officer, received 48,843 shares on Friday, valued at around $ 20 million. But if Goldman’s share price reaches $ 717 per share in October 2026, Waldron would get more than $ 35 million, the publication reported.
  • The figure of $ 409.48 comes from the bank’s average closing price between October 15 and October 21. A jump to $ 717 per share would represent a gain of about 75% – which is doable, if Goldman performs over the next five years at the level it has in the last three. The bank’s share price has risen 80% since Solomon took over as Goldman in October 2018, according to the Financial Times.

Dive overview:

Solomon wouldn’t be the only CEO of a major bank to win such a potentially lucrative award this year. JPMorgan Chase awarded its top executive, Jamie Dimon, a “special award” of 1.5 million stock options in July. The incentive would be worth around $ 50 million, provided that Dimon holds the shares until July 2031. However, the board of directors of JPMorgan can withdraw up to half of these options in the first five years if the The bank’s performance is “unsatisfactory for an extended period,” if the bank’s annual profit turns negative – with some exceptions – or if the bank’s business units fail to meet certain targets.

The Goldman incentive comes about nine months after the bank slashed Solomon’s annual compensation by 36%, from $ 27.5 million in 2019 to $ 17.5 million in 2020. The difference represents a payback of 10 million dollars as part of a penalty for Goldman’s involvement in the 1MDB scandal, much of which predates Solomon’s tenure atop the bank. The bank reduced Waldron’s compensation to $ 18.5 million in 2020 as part of the 1MDB penalty, representing a clawback of $ 6 million.

The $ 17.5 million figure made Solomon the lowest-paid CEO of America’s six largest banks in 2020 – though far from the only one seeing a pay cut. Citi cut former CEO Michael Corbat’s 2020 compensation by 20.7% to $ 19m to reflect his performance as regulators slapped that bank with $ 400m penalty for lack of risk and control. Wells Fargo cut CEO Charlie Scharf’s compensation for 2020 by 12% to just over $ 20.3 million, citing the bank’s financial results for the year. And Bank of America cut CEO Brian Moynihan’s 2020 compensation by 7.5% to $ 24.5 million.

However, the first nine months of 2021 have been a record for Goldman Sachs – as the bank has recorded revenue that exceeds any previous 12-month period for the bank – thanks to business activity and an increase in mergers and acquisitions.

In its Friday filing, the bank acknowledged that it wanted “to improve retention in response to the growing war for talent in the current environment.”

Goldman has seen a raft of executive departures this year, perhaps more than other banks its size. CFO Stephen Scherr announced last month that he was leaving the bank at the end of January. The co-head of asset management, the general counsel, the head of communications and the head of diversity have also announced their departure since March.

In July, Credit Suisse hired two 24-year-old Goldman veterans, Deputy Chief Risk Officer David Wildermuth and top technology executive Joanne Hannaford.

The consumer bank, Marcus, is perhaps the hardest hit within Goldman. The executive who had led it from its inception until 2020, Harit Talwar, said he would be leaving the bank this month. Talwar’s former successor, Omer Ismail, left Goldman in February, just months after taking over Marcus’ day-to-day operations, to play a role in the burgeoning fintech startup at Walmart. Marcus’ head of major partnerships, David Stark, followed. Two Marcus executives left for JPMorgan Chase this spring: Sonali Divilek, product manager, in April; and CFO Sherry Ann Mohan, the following month.

The bank has also served as the starting point for an industry-wide debate over the working conditions of junior analysts. A group of 13 junior Goldman bankers gave a presentation to the bank’s directors detailing the 100-hour work weeks, a damning report that prompted competitors – and ultimately Goldman too – to raise wages and draw better limits. defined around professional expectations.

Rivals’ performance also comes into play in the bonus announced on Friday. While half of the incentive value would come from Goldman’s stock price gains, another half would vary based on the stock’s performance against a peer group consisting of JPMorgan Chase, Morgan Stanley, Bank of America, Citi, Wells Fargo and BNY Mellon, the bank says.

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