Goldman execs may have pay cut over Malaysian fund scandal

GOLDMAN Sachs Group’s board is taking steps to slash its top executives’ 2018 compensation, depending on the outcome of investigations into the investment bank’s role in the ransacking of a multibillion-dollar Malaysian state investment fund.

In a filing with the Securities and Exchange Commission late on Friday, Goldman said the board can reduce the size of 2018 stock-based awards granted to its senior executives if it determines that the results of the investigation into the Malaysian fund scandal would have prompted Goldman’s compensation committee to reduce its top executives’ stock awards.

Such a scenario could affect CEO David Solomon and Chairman and former CEO Lloyd Blankfein, who are slated to receive USD15.4 million and USD14.3 million in restricted stock, respectively, as part of their compensation for 2018.

The scandal centres on the 1Malaysia Development Berhad, or 1MDB fund, which was set up for economic development by former Malaysian Prime Minister Datuk Seri Najib Tun Razak when he took office in 2009. It instead accumulated billions in debt and is being investigated in the US and several other countries. The scandal helped precipitate Najib’s ouster in a historic election defeat last May.

Solomon apologised last month to the Malaysian people for former Goldman banker Tim Leissner’s role in arranging bond sales for 1MDB. The CEO has said that Goldman conducted due diligence but was misled by Leissner and former Malaysian government officials. The new government in Malaysia has filed criminal charges against Goldman Sachs, Leissner and another former executive, Roger Ng Chong Hwa.

Malaysia’s Attorney General Tommy Thomas has said USD2.7 billion was stolen from three bond sales organised by Goldman subsidiaries and that the investment bank received USD600 million in fees, several times industry norms, for organising the deals. The government is seeking several billion dollars in fines from Goldman for violations of securities laws involving making false and misleading statements to investors.

Goldman Sachs denied any wrongdoing in response to Malaysia’s criminal charges.

Shares in the New York investment bank declined 0.7 per cent to USD196.54 on Friday. The stock is up 17.7 per cent this year. – AP

The logo for Goldman Sachs appears above a trading post on the floor of the New York Stock Exchange. – AP