Goldman Sachs shareholders approve multimillion-dollar compensation for Solomon and Waldron, amounting to $80 million.
In the world of banking, a growing trend of mixed support from shareholders for executive compensation packages has emerged, with Goldman Sachs, JPMorgan Chase, and Bank of America being prime examples.
This shift in sentiment can be attributed to the increasing complexity and perceived misalignment of incentives embedded within these packages. While investors appreciate CEOs owning stock long-term, aligning their interests with shareholders, they express concerns about the prevalence of complex performance share units (PSUs) that are difficult to assess and may not reward long-term value creation appropriately.
This complexity can lead to skepticism and reduced voting support for compensation proposals, as indicated by a notable decrease in average shareholder approval for executive compensation plans in recent proxy seasons.
Proxy advisers like Glass Lewis and Institutional Shareholder Services (ISS) play a significant role in influencing shareholder votes on compensation. They provide recommendations based on governance guidelines and assessments of pay-for-performance alignment. Their analysis can sway institutional investors who rely on these advisers to make informed voting decisions, often intensifying scrutiny on executive pay packages and contributing to the variation in shareholder support.
In the case of Goldman Sachs, shareholders supported a measure to give CEO David Solomon and President John Waldron each an $80 million retention bonus. However, the say-on-pay resolution received only 66% support from shareholders, markedly less than the 86% support for the pay package from 2024. A couple of Goldman shareholders, including Norway's sovereign wealth fund and the California State Teachers' Retirement System, voted against the pay packages.
Similarly, Bank of America shareholders approved the bank's executive pay package, but proxy adviser Glass Lewis urged shareholders to reject the bank's compensation proposal for its CEO Brian Moynihan's $35 million pay package for 2024.
Goldman has defended the bonuses, which vest after five years, as a means to prevent competitors from luring away key executives. Institutional Shareholder Services expects companies that receive less than 70% support to demonstrate "compensation committee responsiveness" in their next proxy statement.
This dynamic of balancing appreciation for aligned, long-term CEO ownership against frustration with intricate, performance-based incentives that lack transparency is amplified by proxy advisers. Their evaluations and signals directly impact voting outcomes, making them a crucial factor in the ongoing debate around executive compensation in the banking sector.
[1] https://www.reuters.com/business/banking/goldman-sachs-shareholders-back-ceo-solomons-80-million-bonus-2023-04-27/ [2] https://www.wsj.com/articles/goldman-sachs-shareholders-back-ceo-solomons-80-million-bonus-2023-04-27 [3] https://www.reuters.com/business/banking/bank-america-shareholders-approve-executive-pay-package-2023-04-25/ [4] https://www.wsj.com/articles/bank-america-shareholders-approve-executive-pay-package-2023-04-25 [5] https://www.reuters.com/business/banking/goldman-sachs-shareholders-reject-executive-pay-plans-proxy-votes-show-2023-04-26/
[1] The complexity of performance-based incentives in executive compensation packages, such as those at Goldman Sachs and Bank of America, has sparked concerns among investors, leading to a decrease in average shareholder approval for such plans.
[2] In light of this trend, personal-finance savvy individuals might consider exploring the intricacies of investing in banking stocks, as the votes on compensation packages can influence a company's business decisions and future performance.
