Wall Street giant Goldman Sachs was urged to separate its CEO and chairman roles held by embattled czar David Solomon — and to slash his gargantuan compensation package.
Glass Lewis and Institutional Shareholder Service, two influential proxy advisers, made the recommendations in separate reports ahead of Goldman’s annual shareholders meeting this month.
An independent chair “is nearly always preferable to having a single individual lead both the board and the executive team,” Glass Lewis wrote on Thursday, reiterating its recommendation from last year as a matter of good corporate governance.
Solomon’s leadership has come under scrutiny in recent years over a series of missteps, including the investment bank’s ill-fated foray into consumer lending as well as its failed credit card partnership with Apple.
Goldman has also been beset by an exodus of talent as Solomon has consolidated his position while potential successors have left the firm.
Glass Lewis objected to the salary raises doled out last year to Solomon and other Goldman executives — even as the firm suffered the largest slump in profits in four years.
Solomon was given a 24% pay raise this year. He’ll be earning $31 million — of which $2 million will be in base salary and $29 million will come in the form of variable compensation.
Compensation for Goldman’s top three executives jumped by an average of nearly 24% for 2023, while profit fell 24%, according to company filings.
John Waldron, Goldman’s chief operating officer, pulled down a pay package of $30 million last year — or 28% compared to the year before.
“This does not instill a sense of optimism that the ongoing disconnect will see improvement in the near term,” Glass Lewis said in its recommendation.
“Given these factors, we believe that shareholders may reasonably withhold support from this proposal at this time.”
In the wake of the 2008 financial crisis, efforts to separate the chair and CEO roles became flashpoints at the annual meetings of Goldman Sachs and other Wall Street giants like JPMorgan Chase as investors looked to improve risk oversight.
Banks fended off these calls by making other changes, such as giving new powers to a lead independent director, which Goldman did in 2013.
Investors’ focus on potential conflicts of interest has been revived lately, Tony Carideo, president of The Carideo Group, a corporate elections inspection service.
“Shareholders see it as an ‘agency problem’ where the CEO has interests and a chair could have different interests,” Carideo said.
The joint positions are a common feature at US banks and do not pose a concern, said Mark Narron, a senior director at Fitch Ratings.
However, “it’s probably incrementally positive to separate those roles,” he added.
ISS cited Solomon’s checkered leadership and the bank’s strategy in making its recommendation to split the CEO and chairman roles.
“Solomon’s foray into the consumer realm has been met with missteps and steep losses, which seem to have trickled into further human capital issues,” ISS wrote in the report on Wednesday.
Its assessment marks a change from last year, when ISS recommended against the measure and said at the time there were “no significant concerns regarding the company’s governance practices.”
Goldman Sachs did not immediately provide a comment.
On Wednesday, a company spokesperson cited the bank’s recommendation to vote against the independent chair proposal outlined in its proxy statement.
The resolution to split Goldman’s chairman and CEO titles was filed by the conservative-leaning National Legal and Policy Center. A similar measure it filed last year won just 16% support.
Goldman’s annual meeting is slated for April 24. Like ISS, Glass Lewis recommended votes approving all the bank’s director nominees, including Solomon.
The bank appointed David Viniar, who served as its finance chief from 1999 to 2013, as its next independent lead director. He will succeed Adebayo Ogunlesi, who will step down at the annual meeting.
Goldman shares were broadly flat in afternoon trading, lagging major peers whose stocks were up about 1%.
With Post wires
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