Morning Coffee: How to double your Goldman Sachs bonus to $33m. Dark mutterings from dealmakers
A lot of people at Goldman Sachs have been paid very well indeed for the past year. At the very least, the list of giant bonus recipients include associates and VPs in the investment banking division, and traders on commodities desks. They also include David Solomon, the CEO.
Solomon's pay was disclosed in a regulatory filing last week. It revealed that Goldman Sachs' compensation committee decided to more than double Solomon's bonus, to $33m for 2021, versus around $15m a year earlier.
As for Jamie Dimon at JPMorgan, this giant bonus is accompanied by a diminutive salary. Solomon's salary was 'just' $2m in 2021, the same as it was in 2020; the flex was all in the cash and stock for performance.
What does it take to double your bonus at Goldman Sachs? Not getting fined helps. - In 2020, Solomon had his bonus docked by $10m in retaliation for the 1MDB scandal, but even without the fine, this year's bonus is up nearly 33%. Delivering a 129% increase in net earnings and a post crisis record of 23% in return on equity will also have been factors. - Pay for Goldman's CEO is evaluated against the firm's financial performance, plus factors like client orientation, risk management, and Goldman's 'people strategy scorecard.' After taking all these elements and his "outstanding individual performance" into consideration, Solomon's bonus was inflated accordingly. It's another reminder what banking pay is like when it's unfettered from the European compensation rules that restrict bonuses to 2x salaries.
Solomon's big payday comes despite some grumbling early last year about his use of private jets and insistence that Goldman staff return to the office. It also comes despite the fact that he already received a top-up of $30m in stock vesting in 2026 last October. Goldman's compensation committee clearly want to keep him very happy indeed.
This might not simply be about Solomon's own performance, though. Compensation in banking is partly about performance and partly about retention. Solomon's new $35m compensation package is roughly equivalent to the amounts being paid to James Gorman at Morgan Stanley and Jamie Dimon at JPMorgan. It seems that this is the going rate for the CEO of an American bank nowadays. If you really want to increase your pay in banking, the best thing to do can be to point out how much more you could be earning elsewhere.
Separately, after a year of wild hiring and crazy overwork in investment banking divisions, dealmaking may be going off the boil. The Financial Times has spoken to various senior bankers who suggest that matching 2021 will be a challenge. “At the moment most deals I’m working on have been put on pause as sellers and buyers struggle to find agreement on pricing as the share price of their companies keep jumping. But I’m hopeful,” said one rainmaker. Antitrust officials are more likely to block deals in Washington and shareholders are jumpy about big deals in an uncertain climate (the FT notes that Unilever's stock dropped dramatically on the news of its £50bn offer to buy GSK’s consumer healthcare division). However, there's still likely to be plenty of work from private equity funds with money to invest and 'digitisation, decarbonisation and electrification' are reshaping the economy and driving deals according to Paul Taubman, CEO of PJT Partners.
51-year old SoftBank COO Marcelo Claure is leaving after failing in his attempt to negotiate an increase in his compensation from $16m to $1bn. (Bloomberg)
SoftBank’s $5bn Latin American fund, which Claure oversaw, made a net internal rate of return of 85%. (Financial Times)
16,000 people apply for the Point72 academy program,100s are interviewed and only around 40 get in. To be successful, you'll need to be honest about your abilities (don't lie about the languages you speak or your coding ability) and ready to fill in a questionnaire about your non-academic activities at university. "Tell me about the 40-hour a week job you had in college," says Jami Goodfriend, who leads the academy. (Business Insider)
It's going to be expensive to hire anyone at Credit Suisse who receives the new cash bonus that's clawed back when they leave. - They'll probably want to be compensated for its loss. (Financial Times)
Brevan Howard has committed $250m to its new digital business and venture fund. It's also hired two people at least: Peter Johnson from Jump Capital joined as a portfolio manager; Cem Paya from Gemini for Security. (Bloomberg)
From May 15th, all job listings in New York City will need to state the highest and lowest salaries that they will realistically pay. Salary is not defined, so banks could omit bonuses. (WSJ)
Curly-haired private equity Mogul Guy Hands will be back in court soon as the UK government attempts to wrest control of 38,000 Ministry of Defence homes from him. Hands' firm Terra Firma bought the homes for £3.2bn in 2012, but they're currently valued at £7.6bn and the Ministry of Defence is paying £180m a year to maintain them. Terra Firma said: "Our advice is that while this will be a very long and very expensive legal dispute, we will prevail." (Guardian)
When your "corporate customer strategy”, is meeting clients in strip bars. “I was out and about day and night for my work for 20 years.” (The Times)
Morgan Stanley's top lawyer says senior staff are being selfish in their unwillingness to come into the office. “‘I don’t need to be in the office, I’m super-efficient at home, I’m serving my clients, I’m getting everything done...But we are stewards for the next generation.” (Bloomberg)
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