Goldman Sachs CEO David Michael Solomon attends a discussion on “Women Entrepreneurs Through Finance and Markets” at the World Bank on October 18, 2019 in Washington, DC.
Olivier Douliery | AFP | Getty Images
David Solomon, CEO of Goldman Sachs, saw his salary drop by just over a third in 2020 as part of a punishment for the bank’s role in the 1MDB scandal.
The bank, which posted the highest revenues in more than a decade despite the coronavirus pandemic last year, has admitted to having worked for the Malaysian government’s now infamous development fund 1Malaysia Development Berhad or 1MDB during its work.
The pay cut for Solomon, which makes up about 36% of his annual salary at $ 10 million, reflects previous fines imposed on the bank and not Solomon’s own behavior.
While none of Messrs Solomon, Waldron or Scherr was involved in or aware of the Company’s participation in any illegal activity at the time the Company arranged the 1MDB bond transactions, the Board considers the issue of 1MDB to be an issue. institutional failure, contrary to the high expectations it has for the firm, ” read a January 26 filing from Goldman Sachs. Solomon has been CEO of the bank since 2018.
The compensation cuts also apply to John Waldron, Goldman’s president and chief operating officer, and Stephen Scherr, Goldman’s chief financial officer, who each received a pay cut of $ 7 million. The cuts are part of a broader effort by the bank to recover $ 174 million in wages from former and current executives as part of the fines.
The relocations are “ part of the broader determination of the Board regarding the compensation of certain past and current members of senior management in light of government findings and regulatory investigations and the extent of government and government resolution. regulatory issues by the company related to 1Malaysia Development Berhad (“1MDB”), ”the SEC filing wrote.
Solomon’s salary package consists of $ 2 million in base salary, a $ 4.65 million in cash bonus and $ 10.85 million in stock, which is based on the bank’s performance. His 2020 salary was then $ 17.5 million instead of the $ 27.5 million he received in 2019, despite the fact that last year turned out to be a peak year for the bank with revenues of $ 44.56 billion the highest since 2009.
The 1MBD scandal, still under investigation since 2015, was one of the biggest blotches on Goldman Sachs’ reputation at a time when the US bank was still dealing with its image troubles over criminal allegations of poor asset sales during the financial crisis of 2008-09.
Prosecutors accused the bank’s senior executives at the time of overlooking fraud and bribery in pursuing hundreds of millions of dollars in bond sales fees to raise money for the fund while working for the then Prime Minister of Malaysia Najib Razak and 1MDB adviser Jho Low, accused of devising the fraud.
The fund was stolen by Najib in the amount of $ 700 million, cash deposited into the Prime Minister’s own private bank account, and proceeds from the sale of bonds were reportedly used to pay bribes to Malaysian and Middle Eastern officials.
Goldman pleaded guilty to his role in the scandal in October, agreeing to pay nearly $ 3 billion to government agencies in four countries to end US investigations.
Two Goldman Sachs bankers have been criminally charged, while Najib was sentenced to 12 years in prison and a fine of 210 million Malaysian ringgits ($ 51 million). Jho Low remains at large and is believed to be living in China, despite an Interpol Red Notice issued for him by Malaysian authorities. The scandal would have cost Goldman Sachs more than $ 5 billion.