Goldman cuts Solomon, and his pay, down to size
NEW YORK, Jan 27 (Reuters Breakingviews) - Chief executives: they’re just another member of the team. Or at least that is the apparent message Goldman Sachs (GS.N) is trying to send by slashing boss David Solomon’s pay by a third for 2022, to $25 million. The decision makes sense for the Wall Street bank’s leadership since, like many of its peers, it is shrinking headcount and bonuses. The risk is that where employees see solidarity, investors see instability.
Measured by Goldman’s performance last year, Solomon actually did fairly well. While pre-tax profit halved, it was only from a weird, pandemic-distorted 2021. It remained 27% higher than in 2019. Goldman also grew its book value – accounting-speak for shareholders’ claim on the lender – by a respectable 6%. Its stock also outperformed archrival Morgan Stanley’s (MS.N) during the year.
To dwell on that, however, assumes too much science in what is basically a symbolic move. It would have been hard to reward Solomon at a time when employees are feeling the chill, and hot on the heels of 3,200 layoffs. Morgan Stanley also paid less to Chief Executive James Gorman, though only by 10%. And Goldman’s board has misread the room before in allocating bonuses.
Solomon’s humble pie may taste good to his Goldman colleagues, but it could present a different flavor profile to shareholders. He already conceded dropping the ball with the consumer banking project, mere months after raising its targets. What looks like unity also could suggest a CEO losing the confidence of his board. And that’s not the sort of thing that will give the shares a lift.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
Goldman Sachs said its board had awarded Chief Executive David Solomon compensation of $25 million for his work in 2022, compared with $35 million the previous year.
The board said it factored in the company’s 2022 performance and Solomon’s “strong individual performance and effective leadership.”
Goldman said on Jan. 17 it had laid off around 3,200 employees as part of a headcount reduction.
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