Goldman CEO David Solomon Takes $10 Million Pay Cut for 1MDB Scandal

The bank had said it would claw back or withhold $174 million in compensation from current, former executives

Goldman Sachs Group Inc. slashed Chief Executive David Solomon’s 2020 pay by 36%, punishment for the bank’s admission last year that it broke U.S. laws in its dealings with an investment fund at the heart of a global corruption ring.

Mr. Solomon received a $17.5 million compensation package for 2020, down from the $27.5 million he got for 2019, according to a securities filing on Tuesday.

In October, Goldman agreed to pay nearly $3 billion to government officials in four countries to end an investigation into work it performed for 1MDB, a Malaysian fund that prosecutors had alleged was used to pay bribes to politicians in Malaysia and the Middle East. The bank said at the time that it would take a total of $174 million in compensation from current and former executives.

David Solomon, chief executive officer of Goldman Sachs PHOTO: SIMON DAWSON/BLOOMBERG NEWS

Mr. Solomon’s 2020 pay would have been $10 million higher but for the actions its board of directors took in response to the 1MDB saga, Goldman said in the filing. His compensation package consisted of a $2 million base salary, a $4.65 million cash bonus and a $10.85 million stock award that is tied to how well the bank performs over the next few years.

Costs and fines related to the fallout from the 1MDB scandal took a bite out of what was a banner year for Goldman’s businesses, which got a big boost from the markets’ bounceback from the depths of the coronavirus recession. Annual revenue of $44.56 billion was Goldman’s highest since 2009.

Other bank chiefs that presided over strong growth last year were rewarded with big raises. Morgan Stanley paid CEO James Gorman $33 million for his work in 2020, an increase of 22%.

John Waldron, Goldman’s president and chief operating officer, and Stephen Scherr, Goldman’s finance chief, saw their 2020 pay cut by 24% and 31%, respectively. Each would have earned $7 million more but for 1MDB.

The three top executives weren’t “involved in or aware of the firm’s participation in any illicit activity,” Goldman said in the filing. However, their pay was reduced because the bank’s board viewed the 1MDB scandal as “an institutional failure, inconsistent with the high expectations it has for the firm.”

Goldman helped raise $6.5 billion for 1MDB by selling bonds to investors. Prosecutors alleged that senior Goldman executives ignored warning signs of fraud in their dealings with 1MDB and Jho Low, an adviser to the fund. Two Goldman bankers have been criminally charged in the scandal.

All told, Goldman’s dealings with 1MDB cost the bank more than $5 billion.

Billions of dollars that went missing from Malaysia’s 1MDB has become one of the biggest financial scandals ever, with Goldman Sachs agreeing to pay the U.S. government more for its involvement than it did after the 2008 crisis. Here’s how the alleged fraud happened and then fell apart. Photo Composite: Adam Falk

By Peter Rudegeair

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