Concerns Arise Over Goldman Sachs Executives’ Bonuses
Goldman Sachs is facing significant scrutiny regarding the substantial bonuses awarded to its chief executive, David Solomon, and president, John Waldron. Each executive is set to receive bonuses valued at $80 million, a decision that has drawn criticism from Glass Lewis, a prominent shareholder advisory firm.
Recommendations from Advisory Firm
In a report released on Friday, Glass Lewis advised shareholders to reject the proposed bonuses. The firm highlighted that the structure of these bonuses diverges from Goldman Sachs’ historical practice of linking compensation to performance-based equity awards. Instead, these bonuses will be fully stock-based and void of performance conditions.
Concerns Raised by Shareholders
Glass Lewis noted that while media reports indicated a significant level of turnover in talent at Goldman Sachs, the explanations provided to shareholders regarding the bonuses were seen as largely inadequate. The advisory firm criticized the lack of detailed disclosures surrounding such substantial financial awards, calling the situation “egregious.” They stated, “On that basis alone, it would warrant a vote against this proposal this year.”
Retention Strategy or Excessive Payouts?
The $80 million retention bonuses were granted to ensure Solomon and Waldron remain with the bank. Observers believe that Waldron is viewed as a likely successor to Solomon. These bonuses are in addition to their annual compensation of $39 million and $38 million, respectively, from the previous year and exceed the awards offered to chief executives at competing banks like JPMorgan and Morgan Stanley.
Shareholder Sentiment and Future Implications
Amid growing concerns, insiders at Goldman Sachs have expressed apprehension that shareholders may oppose the upcoming “say on pay” vote during the annual general meeting scheduled for April 23 in Dallas. Shareholders at US banks typically support executive compensation packages, but dissent is not entirely unprecedented; JPMorgan faced a backlash over a $50 million special award for CEO Jamie Dimon last year, which led the bank to promise no further special awards.
Goldman Sachs’ Position
The bank’s board defended its decision, citing intense competition for leadership talent. They stated, “A 100 percent stock-based grant is fully aligned with long-term shareholder value creation,” signifying their belief that the compensation strategy is in the best interests of both executives and shareholders alike.
Overall Shareholder Support Trends
In 2024, the approval rate for Goldman Sachs’ executive compensation dropped to 86%, a significant decline from 94% the previous year. Glass Lewis also warned shareholders about a new carried interest pay plan for executives, which complicates the assessment of pay arrangements prior to the distribution of bonuses.