Goldman Sachs (GS - Free Report) chairman and chief executive officer (CEO) — David Solomon — received a 19.6% pay hike in his total compensation package. His annual salary was increased to $27.5 million in 2019 from $23 million in 2018, according to a Securities and Exchange Commission (SEC) filing last week.
The CEO’s pay package includes a base salary of $2 million, cash bonus worth $7.65 million and $17.85 million for 2019, consisting of performance-based restricted stock units or "PSUs".
The hike, as believed, is well deserved keeping in mind Solomon’s contribution to Goldman, when he took over the reins of the company in October 2018. Per the bank, Solomon “successfully executed on his priorities in his first full year”. “He led our development of the firm’s three-year business plan and a clear long-term strategy that leverages our foundational advantages, enhances the firm’s long-term mindset and instills a culture of innovation,” the bank added. He also “excelled as a skilled spokesman for the firm both internally and externally,” the firm noted.
He has been instrumental in boosting revenues of $36.5 billion, in line with the prior year, despite a challenging investment-banking business environment.
Besides Goldman’s solid operating performance in the year, the CEO announced that the $1.3-billion cost-cutting plan was also a tailwind. The plan included laying off some managers and shifting of staff to less costly localities. The CEO disclosed the company’s goal at Goldman’s first-ever investor day this January to increase return on equity above 13% in the next three years, from 2019’s 11.5%. Notably, Solomon has worked on diversifying newer avenues, including consumer banking and wealth management.
In 2018, some of Solomon’s stock rewards were planned to be clawed back, depending on the outcome of the investigation related to Goldman’s 1MDB scandal. However, such a clause has not been included in the 2019 pay package despite no resolution on the issue.
All positive factors have caused investors to become optimistic about this banking giant’s long-term prospects. Notably, the company's share price appreciated 37.6% in 2019 compared with 20.7% growth registered by the industry.
Among other banking giants, Bank of America Corp.’s (BAC - Free Report) chairman as well as CEO — Brian T. Moynihan’s — total compensation for 2019 remained flat with the prior-year level. Other Wall Street biggies that have announced compensations for CEOs include JPMorgan (JPM - Free Report) , with a hike of 1.6%, while Morgan Stanley (MS - Free Report) has announced a 7% reduction.
Solomon has been adept in strategically evaluating the various facets of Goldman’s major businesses. We believe the pay hike will prove to be a major morale booster. Goldman’s fundamentals remain highly promising with a diverse business model and a solid balance sheet.
Goldman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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