Goldman Sachs’ Layoffs Leads to Pay Reduction of 30% for CEO David Solomon

By:  Benyamin Davidsons

Goldman Sachs struggled in 2022 with declining revenue and some failed business ventures, leading to layoffs for thousands of workers, as well as a hefty pay cut for its CEO.

As reported by the NY Post, the company’s Chief Executive Officer, David Solomon, felt the company’s slump, with his salary cut 30 percent in 2022 from the previous year.  To be sure, Solomon still made $25 million for the year, but it is well under the $35 million he had banked in 2021, amid record profits from a busy year.  By contrast, the year 2022 was a difficult one for Goldman.  The financial giant’s net income fell a whopping 48 percent from the previous year, to $11.3 billion.

The company stock’s share price declined 10 percent.  A major source of its losses was a consumer business, named Marcus, which it invested in, which led to $3.8 billion in pretax losses since the venture was launched in 2016.  Earlier in January, Goldman laid off 3,200 workers, marking its biggest cut since the 2008 financial crisis. Hundreds of additional employees at the bank were expected to leave on their own, due to the lean bonus payments they were given.

As CEO of the company, Solomon’s salary is directly linked to the company’s performance.  His annual base salary is just $2 million, and he earned $23 million in variable compensation.  Of that bonus, $16.1 million is issued in restricted stock units, which means he can’t take it out or use it for several years, as per a publicly available filing.  “As is always unique to Goldman Sachs, his compensation is aligned with the direction of compensation for the partnership, reflecting solid results in a challenging environment, but down from the records of 2021,” an insider with knowledge of the matter told The Post.

The pay cut was revealed after the CEO admitted that Goldman had “tried to do too much too quickly” in its venture into consumer banking. In early January, Goldman Sachs announced a worse-than-expected profit decline in its fourth quarter report, with its profits plummeting 66 percent, down to $1.33 billion or $3.32 per share.  “I think it became clear to us early in 2022 that we were doing too much and it was affecting our execution,” Solomon said during an earnings call, referring to the ailing Marcus segment.  “I think we probably in some places haven’t had all the talent that we needed to execute the way we wanted. We’re making adjustments on that,” Solomon added.

As per the Post, this year is the lowest Solomon’s compensation has been since 2018, when he first took over as CEO, and was compensated $23 million for the year. Mr. Solomon, 61, is taking a much heavier pay cut than his fellow CEOs in rival financial institutions. JPMorgan’s CEO, Jamie Dimon, 66, made $34.5 million this year, in line with what he was paid in 2021.  CEO at Morgan Stanley, James Gorman, 64, saw his salary drop more modestly, or just 10% in 2022, leaving his take at $31.5 million, down from $35 million in 2021.