Goldman CEO takes $13 million pay cut for 1MDB scandal

The board reduced David Solomon's package to US$17.5 million (S$23.2 million) for 2020. PHOTO: AFP

NEW YORK (BLOOMBERG, REUTERS) - Goldman Sachs cut chief executive officer David Solomon's annual compensation by 36 per cent after deducting a penalty for the bank's role in Malaysia's 1MDB bribery scandal.

The board reduced his package to US$17.5 million (S$23.2 million) for 2020, down from US$27.5 million a year earlier. The payout fell after Mr Solomon was required to return about US$10 million (S$13.2 million) to make amends for the firm's criminal role in the looting of the Malaysian investment fund, the bank said in a filing on Tuesday (Jan 26).

Excluding that penalty, the board effectively kept Mr Solomon's pay flat for the year.

The 1MDB scandal dates to the government of former Malaysian Prime Minister Najib Razak, which set up the 1MDB fund in 2009.

Between 2009 and 2014, Goldman bankers paid more than US$1.6 billion in bribes to foreign officials in Malaysia and Abu Dhabi to win 1MDB business, including underwriting US$6.5 billion in bond sales, for which it earned US$600 million in fees, the bank has said.

Gildman's pay decisions cap a year in which its revenue soared 22 per cent and the bank paid the highest penalty ever levied by the US in a foreign bribery case. While Mr Solomon wasn't accused of wrongdoing, the board said in October it would be "appropriate" to withhold US$31 million in compensation for the CEO and three of his top deputies after the firm entered into more than US$5 billion in settlements to resolve civil and criminal probes.

In October, just weeks before the US elections, Goldman sealed a pact with the US Justice Department and other regulators that had been investigating the firm's 1MDB role. The board vowed to hold current and former executives accountable by seeking clawbacks, forfeitures and pay deductions.

While the bank, like rivals, did benefit last year from market tumult that fueled client trading, industry leaders have been frugal with compensation for the rank-and-file. Goldman's spending per person on compensation rose only 2 per cent last year.

Goldman is going through a phase of belt-tightening to sharply cut costs to realize more than a billion dollars in annualized savings. The bank has achieved about half of the US$1.3 billion goal it had sketched out at its 2019 investor day. Goldman abandoned its own pandemic pledge to pause firings, and carried out at least two separate rounds of job cuts in 2020 to rein in costs.

Last week, Morgan Stanley boosted CEO James Gorman's pay 22 per cent to US$33 million after a third straight year of record earnings. He now holds the title of the most well-paid CEO of a prominent US bank, leaping past JPMorgan Chase & Co's Jamie Dimon, whose compensation package held steady at US$31.5 million.

Join ST's Telegram channel and get the latest breaking news delivered to you.