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Goldman to Withhold Top Executives' Pay Until 1MBD Resolves

Zacks Equity Research

The Goldman Sachs Group GS plans to hold back distribution of bonuses worth at least $7 million to the top executives until investigations related to the Wall Street biggie’s role in the 1MDB scandal are completed.

Further, in its annual filing, Goldman disclosed that it has added a new forfeiture provision in its annual compensation plans that would give it the permission to reduce the size of the “award prior to payment and/or forfeit the underlying transfer-restricted shares."

This would primarily impact the current Chief Executive David Solomon and former head Lloyd Blankfein, if the outcome of ongoing probe turns out to be negative.

Blankfein stepped down from his role of CEO in October 2018, and later in December retired as chairman. For 2018, he is eligible to receive $20.5 million, which includes $2 million salary, $18.5 million bonus and more than $14 million in restricted shares that vest over time.

Further, David Solomon, who succeeded Blankfein as CEO and chairman, should receive pay of $23 million for 2018, including a $1.9 million salary, $21 million bonus and restricted shares of $15.4 million, per the annual filing.

Goldman also disclosed that it may withhold payments for a period as long as five years if it is determined that the results of “the 1MDB proceedings would have impacted the Committee's 2018 year-end compensation decisions for any of these individuals.”

Goldman continues to face probes and queries from several federal agencies and a few foreign governments for its businesses conducted during the pre-crisis period. However, its focus to capitalize on new growth opportunities through several strategic investments, including the digital consumer lending platform, will likely bolster overall business growth.

Shares of the company have lost around 14% in the past six months compared with the 13.4% decline of the industry.

Goldman currently carries a Zacks Rank #4 (Sell).

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