Goldman Execs are Paying Themselves a Cut of the Bank’s Private Funds

Image Credit: iStock, vOv

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Apparently, for Goldman Sachs CEO David Solomon, a flourishing side career as a DJ isn’t enough to pad the old nest egg as he spies retirement on the horizon.

The bank’s head honcho — whose ventures into electronic music will see him spinning tunes this summer at Chicago’s Lollapalooza — is taking a cut of the profits from the bank’s lucrative private investment funds. So are several of his top lieutenants, according to The Wall Street Journal. Investors, already up in arms about executive payouts, might not like the sound of this tune.

Paycheck Remix

Solomon made $35 million in 2021, which was normal for a CEO of a large US bank. At the same time, the outsize earnings of executives at private equity funds, ad-tech, and cryptocurrency executives have created outsize fortunes.

The co-CEOs at investment firm KKR each made some $500 million in 2021, and that doesn’t begin to touch the unparalleled new wealth being generated in the cryptocurrency space — with $65 billion to his name, Binance founder and CEO Changpeng Zhao is now the 19th richest person in the world, according to Forbes. One almost can’t blame the bankers for taking note — especially of their PE brethren’s take-home — and getting creative. And so, in a futile but determined act of catch-up, Goldman’s executives are tapping the bank’s sizeable private investments to line personal coffers:

  • Previously, the profits from Goldman’s $426 billion in private equity funds, which invest in vehicles such as real estate and corporate buyouts, were split 50/50 between the bank and the managers who run them.
  • Now, the fund managers will get just 35%, sources tell the Journal. Goldman’s 400 partners will split the other 10%, while the remaining five percent will be awarded to Solomon and fewer than a dozen top executives, who stand to reap hundreds of millions of dollars from the changes over the next few years.

King of Pop: Solomon’s musical taste leans towards cutting-edge electro and house, yet his efforts to boost his take-home pay clearly hark back to the Michael Jackson classic Don’t Stop ’til You Get Enough. According to Bloomberg, last year Solomon sought a cut of profits from any SPACs Goldman launched — although his protracted negotiations on such an arrangement caused Goldman to miss out on the SPAC boom by failing to launch any of its own blank-check companies. Meanwhile, the corporate governance advisors at Glass Lewis have urged Goldman shareholders to vote against a proposed stock bonus worth $30 million for Solomon and $20 million for his deputy, John Waldron, at the bank’s AGM next week.