The Goldman Sachs Group, Inc. ( GS ) CEO Lloyd Blankfein
received a massive pay raise of nearly 75% in 2012, as per a latest
SEC filing by the bank. However, the hike in compensation, which
will bring Blankfein's salary to $21 million, is mostly driven by
the doubling of the stock-based compensation and bonus. Further,
this will be Blankfein's highest pay since 2007, before the
financial crisis walloped major U.S. banks.BANK OF AMER CP (BAC): Free Stock Analysis
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With this increment, Blankfein will join the elite list of the
highest paid mega bank CEOs, surpassing Bank of America
Corporation 's ( BAC ) CEO Brian T.
Moynihan, whose pay package amounted to $12.1 million in 2012.
Blankfein also surpassed JPMorgan Chase & Co.
( JPM ) CEO Jamie
Dimon, whose pay was nearly $11.5 million for 2012, after his bonus
was substantially slashed following the London Whale trading
debacle. However, Blankfein will be behind Wells Fargo
& Company 's ( WFC ) John Stumpf, who
was paid $22.87 million in 2012.
However, the foremost question lingering in the minds of investors
is whether Blankfein's hefty pay hike justified? 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. Further, Goldman's shares rose a
whopping 41% in 2012 and went up by almost 17% year to date.
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 with
several legal settlements. This impressive performance led to
Blankfein receiving $2 million as base pay, and a cash bonus and
stock award of $5.7 million and $13.3 million, respectively, each
of which almost doubled compared to the prior year. Further,
Blankfein was awarded a $5 million cash bonus to be paid out over
the span of 3 years, subject to the meeting of certain
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
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 #3 (Hold).