Yahoo Finance New Era for Pay Catapults Carlyle’s CEO Past Old Goldman Rival
(Bloomberg) -- They were the two stars at Goldman Sachs Group Inc. in the race to become chief executive officer.
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One, David Solomon, spurned overtures to join Carlyle Group Inc. and reached the top of the investment bank, where he has won compensation awards valued at a total of $189 million over the past six years.
The other, Harvey Schwartz, left Goldman, showed up at Carlyle after a lengthy hiatus, and scored pay packages pegged at $217 million since arriving last year.
It’s the newest example of Wall Street’s split screen for pay: Investment banks may have the popular reputation for rich rewards, but there’s far more money to be made in the upper rungs of big buy-side shops. In this case, Schwartz, 60, powered past his onetime peer at Goldman while running an asset manager whose stock has trailed rivals and has a market value one-eighth the size of the bank’s.
While investment banks face shareholder and regulatory pressure to keep a lid on pay, publicly traded private equity firms are giving their next generation of leaders opportunities to earn nine- and 10-figure rewards. That is, if they meet targets over several years.
Some of Carlyle’s competitors have crafted packages that overshadow Schwartz’s. KKR, for instance, gave co-CEOs Joseph Bae and Scott Nuttall incentives that could leave them each holding more than $1 billion of stock if they meet all targets in coming years. Apollo gave its co-presidents each a stock package that’s currently worth almost $700 million if they reach certain milestones.
Alternative-asset managers have said tying executives’ fortunes closely to the performance of their shares and funds aligns them with the interests of investors. Their willingness to lavish so much on top brass and rainmakers has created a gravitational force across Wall Street, pulling away investment banks’ top talent.
The bulk of Schwartz’s pay took shape last year when Carlyle disclosed that it planned to give him a five-year stock incentive package valued at $180 million. That’s the amount of restricted stock units he stands to be awarded if he sticks around long enough and boosts Carlyle’s share price. To tie top executives’ fortunes more closely to those of shareholders, Carlyle added an additional $30 million to Schwartz’s equity-linked awards earlier this year.
Then on Wednesday, Carlyle disclosed the board’s decision to reward him a cash bonus for last year that was double the size of his target, reflecting his initial progress in boosting fee-related earnings, cutting costs and making other changes.
Still, to collect all of his incentives, the stock will have to double within a half-decade. If he achieves that, his total equity stake would be worth more than $500 million.
Solomon’s Haul
Meanwhile, Solomon, 62, has notched annual compensation packages of between $17.5 million and $35 million during his tenure, as well as a special one-time grant. Goldman’s stock has climbed more than 80% along the way, also boosting the value of his equity. And he reaps some carried interest tied to the performance of certain Goldman investment vehicles.
The pace of Solomon’s wealth accumulation remains slower than what his predecessor, Lloyd Blankfein, was able to achieve just before the financial crisis. That included a then-record $68 million package for 2007 — another step on Blankfein’s path to billionaire status.
Private equity firms such as Blackstone Inc., Apollo Global Management Inc. and KKR & Co. have grown far beyond their breakthrough era, in which top executives made fortunes in carried-interest payouts.
Now publicly traded, the coterie prefers to pack top executives’ compensation packages with stock, encapsulating the industry’s transition from freewheeling corporate raiders to investing supermarkets to the world.
Goldman’s Raises
The shifting dynamic has been a source of consternation inside the big US investment banks, where annual pay for CEOs hasn’t surpassed $40 million in years. After a record profit in 2023, JPMorgan Chase & Co.’s Jamie Dimon got $36 million. Bank of America Corp.’s Brian Moynihan was granted $29 million, a modest pay cut.
At Goldman, Solomon and his deputies have compared notes in recent years on how much more their counterparts at buy-side firms stand to make. Some of the bank’s most senior leaders have come to believe they’re not paid enough and have sought other ways to boost their pay by accessing rewards at other parts of the firm.
When Goldman initially created a special one-time award for Solomon and Chief Operating Officer John Waldron in 2021, it cited the “rapidly increasing war for talent.”
For grousing bankers, there’s little relief in sight.
On Thursday, proxy adviser Glass Lewis gave Goldman’s executive-pay plan an “F” grade and urged shareholders to vote against raises that amounted to a “significant disconnect between pay and performance.”
Read More: Goldman Pay Plan Gets ‘F’ Grade as Investors Told to Vote No
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