Goldman Sachs pay vote draws weakest support since 2016

Goldman Sachs’ decision to reward chief executive David Solomon a 20 per cent pay rise for his first full year at the helm drew a sharp rebuke from shareholders frustrated with years of subpar returns and worried about an impending recession.

Just 71 per cent of investors approved the pay plan presented at the bank’s virtual annual meeting, the lowest endorsement since 2016 when proposals to make Lloyd Blankfein the best paid chief executive on Wall Street won a support from just 67 per cent of shareholders.

The result was sharply worse than the 91 per cent support for Goldman’s pay proposals a year ago.*

Mr Solomon’s $27.5m package was detailed in regulatory filings in March.

The bank’s returns have lagged rivals for much of the last five years, but Goldman argued that 2019 was a year of transition and Mr Solomon had made important progress on delivering a three-year strategic plan that will lift Goldman’s results.

The shareholder advisory group ISS was unimpressed. “Many investors may have preferred to see increased incentive payouts reserved until returns on such investments are ultimately realised,” ISS said in a circular issued before the meeting, which advised investors to vote against the remuneration report because of “misalignment” between pay and performance.

Another proxy adviser, Glass Lewis, gave the pay plan an “F” grade but said shareholders should support it.

At the meeting, shareholders expressed concerns about the impact of the coronavirus pandemic on the bank’s finances. Susan Perez, a portfolio manager at Harrington Investments asked if the bank would consider suspending executive bonuses and dividends to fortify itself against the potential fall out.

Mr Solomon responded by telling her that executive pay was an “important responsibility for us both at the board and committee level” and that it seeks “to take shareholder feedback as a valuable input into discussions”.

The bank and its peers on Wall Street have suspended their multibillion-dollar share buybacks but insisted they will defend dividends.

Michele Burns, chair of Goldman’s compensation committee, told the meeting that it was “very difficult” to compare Mr Solomon’s 2019 pay to his package in 2018, when he was president until October before becoming chief executive.

She added that Mr Solomon’s 2019 pay was not that much higher than the $27.3m annualised rate of his predecessor Lloyd Blankfein for 2018 and that the bank had looked at both Mr Solomon’s performance and peers across the industry. Mr Solomon was the second-best paid bank chief executive last year.

Marty Mosby, analyst at Vining Sparks, said that while executive pay votes would be “more contested each year” across the industry, Goldman would receive “more attention and pushback” than peers because its earnings have been falling in recent years while rivals have seen profit growth. 

Goldman is the second big bank to put its 2019 pay proposals to shareholders. Citigroup won 92 support for its remuneration plan, which included keeping pay for chief executive Mike Corbat steady at $24m.

More than 95 per cent of Goldman’s shareholders supported the reappointment of the bank’s 11 directors.

*This article has been amended to correct figures for support of Goldman’s pay report in prior years

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