Despite the drop recorded in fixed income trading business in 2013, The Goldman Sachs Group, Inc. (GS) Chief Executive Officer (CEO) Mr. Lloyd C. Blankfein has been awarded restricted stock worth $14.7 million for 2013, as per the latest SEC filing by the bank. This reflects a year-over-year rise of around 11% in stock awards. Notably, Blankfein’s total package will include 88,422 restricted stock units.
Following the rise in the CEO’s stock awards, shares of Goldman waned 1.04%, implying that the market has not positively reacted to the news, as the CEO might have failed to meet investors’ expectations.
Usually, Goldman awards approximately 70% as stock options to senior executives. Therefore, the cash bonus is estimated to be $6.3 million for Blankfein, though it is yet to be disclosed.
Collectively, including base salary of $2 million, Blankfein’s total pay package might come in at around $23 million for 2013, reflecting a 9.5% hike on a year-over-year basis. Notably, this excludes estimated long-term incentives, which are expected to be disclosed later in 2013.
With this increment, Blankfein's pay package will surpass that of the CEOs of banking majors JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS). JPMorgan’s chief Jamie Dimon has received a 74% hike in pay, which totaled $20 million in 2013, while Morgan Stanley’s chief James Gorman has been conferred with stock bonus of $4.9 million in 2013, up 88% year over year. However, among other major banks, Bank of America Corporation (BAC) and Wells Fargo & Company are yet to disclose their CEO's pay packages.
The hike, as believed, is well deserved keeping in mind Blankfein’s contribution to Goldman, when he took over the reins of the company in 2006. He has been instrumental in almost doubling full-year 2012 net profits to $7.5 billion from 2011 and further increasing it 8% to $8 billion in 2013.
Moreover, Goldman's total costs for employee compensation and benefits waned 3% to $12.6 million in 2013. The bank’s shares also rose a whopping 36.4% in 2013.
Blankfein has also been adept in strategically evaluating the various facets of Goldman’s major businesses. Besides announcing numerous cost cutting initiatives and divestment of non-core units, the CEO has single-handedly revived profitability at Goldman by handling several legal settlements.
We believe Blankfein’s pay hike will prove to be a major morale booster. Even though Goldman’s fundamentals remain highly promising with a diverse business model and a strong balance sheet, regulatory issues, including lawsuits and the fundamental pressures on the banking sector are anticipated to pose as headwinds to profitability.
Yet, we consider Goldman to be a value investment due to its steady dividend-yielding nature, well-managed global franchise and healthy capital base.
Goldman currently carries a Zacks Rank #2 (Buy).
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