Wall Street giant Goldman Sachs has been asked to separate its CEO and chairman roles held by embattled czar David Solomon – and slash its gargantuan compensation package.
Glass Lewis and Institutional Shareholder Service, two influential proxy advisors, made the recommendations in separate reports ahead of Goldman’s annual shareholder meeting this month.
An independent chairman “is almost always preferable to a single individual leading both the board and the management team,” Glass Lewis wrote Thursday, reiterating his recommendation from last year for good corporate governance. ‘business.
Solomon’s leadership has come under scrutiny in recent years due to a series of missteps, including the investment bank’s ill-fated foray into consumer credit as well as the failure of its credit card partnership with Apple.
Goldman has also faced an exodus of talent as Salomon has consolidated its position while potential successors have left the firm.
Glass Lewis opposed pay raises given last year to Solomon and other Goldman executives — even as the firm suffered the biggest drop in profits in four years.
Solomon got a 24% pay raise this year. He will earn $31 million, including $2 million in base salary and $29 million in variable pay.
Compensation for Goldman’s top three executives jumped an average of nearly 24% for 2023, while profits fell 24%, according to company filings.
John Waldron, Goldman’s chief operating officer, cut his compensation by $30 million last year, or 28% from the year before.
“This does not inspire a sense of optimism that the current disconnect will see improvement in the near term,” Glass Lewis said in its recommendation.
“Given these factors, we believe shareholders can reasonably decline to support this proposal at this time.”
Following the 2008 financial crisis, efforts to separate the roles of chairman and CEO became flashpoints at the annual meetings of Goldman Sachs and other Wall Street giants like JPMorgan Chase, as investors sought to improve risk monitoring.
Banks have responded to these calls by making other changes, such as granting new powers to an independent lead director, which Goldman did in 2013.
Investor attention to potential conflicts of interest has been revived recently, according to Tony Carideo, president of The Carideo Group, a corporate election inspection service.
“Shareholders see this as an ‘agency problem’ where the CEO has interests and a chairman might have different interests,” Carideo said.
Pooled positions are common at U.S. banks and not a problem, said Mark Narron, senior director at Fitch Ratings.
However, “it is probably progressively positive to separate these roles,” he added.
ISS cited Solomon’s uneven leadership and the bank’s strategy in recommending separating the CEO and chairman roles.
“Salomon’s foray into consumer spending resulted in significant missteps and losses, which appear to have spilled over into other human capital issues,” the ISS wrote in the report Wednesday.
Its assessment marks a change from last year, when ISS came out against the measure and said at the time that there were “no significant concerns regarding the company’s governance practices “.
Goldman Sachs had no immediate comment.
On Wednesday, a company spokesperson cited the bank’s recommendation to vote against the independent chairman 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 introduced last year received only 16% support.
Goldman’s annual meeting is scheduled for April 24. Like ISS, Glass Lewis recommended a vote approving all nominees for bank director, including Solomon.
The bank has named David Viniar, who served as chief financial officer from 1999 to 2013, as its next lead independent director. He will succeed Adebayo Ogunlesi, who will step down at the annual meeting.
Goldman shares were broadly flat in afternoon trading, lagging its major peers whose shares were up about 1%.
With post wires
New York Post
