By Saeed Azhar

NEW YORK (Reuters) -Goldman Sachs raised CEO David Solomon's compensation by 26% to $39 million for last year, according to a filing, and its board lined up an $80 million stock retention bonus that signals he will stay at the helm for another five years.

John Waldron, 55, who is Goldman's president and chief operating officer (COO) was also awarded a retention bonus of $80 million in restricted stock that vests in 5 years. He is widely seen as a successor to Solomon. 

The latest bonuses are an effort by Goldman's board to retain the CEO and COO as a senior leadership team, the company said in the filing.

 CEO succession is in focus across Wall Street. From Jamie Dimon at JPMorgan Chase to Brian Moynihan at Bank of America, investors are focused on the long tenures of executives running the largest U.S. banks. 

The latest vote of confidence for Solomon, 63, comes after a turbulent period during which investment banking activity declined and Goldman's ill-fated consumer business lost money, prompting criticism of his leadership. He has faced off doubters as the bank's stock rallied, markets rebounded, and he slimmed down its retail operations.

Goldman Sachs shares were trading 1.2% higher in morning trade on Friday.

The bank's share price jumped 48% in the last year, and is up 174% since Solomon took over in 2018. At a Goldman partner alumni event last month, the rallying stock contributed to a cheery mood, several attendees said, declining to be identified discussing a private event.

"The firm is delivering strong performance and the board is determined to maintain our momentum, ensure stability, and keep in place a solid succession plan,' said Goldman Sachs spokesperson Tony Fratto. 

"The board is also evolving compensation to enhance the firm’s ability to continue to attract and retain the best talent at a time when the competition for Goldman Sachs talent is especially fierce, including from asset managers and other non-banks," he added.

Goldman Sachs beat Wall Street estimates and earned its biggest quarterly profit in more than three years as its investment bankers brought in more deal fees, while its traders benefited from active markets. Net income climbed to $4.11 billion in the fourth quarter, the bank reported on Wednesday.Solomon told the Reuters Next conference in December that he will lead the bank as long as the board wants him to remain.

"I've got a great job and I'll be the CEO as long as the board wants me to be," he said.

Solomon's compensation rose from $31 million in 2023. His 2024 compensation included a $2 million base salary, an $8.3 million in cash bonus and the remainder in stock and a new type of incentive award.

BACK TO TRADITIONAL MAINSTAYS

Solomon grew up in Hartsdale, New York and earned a bachelor's degree in political science from Hamilton College. As a graduate, he was rejected by Goldman for a job, and later joined as a partner in 1999 from Bear Stearns. 

He climbed the ranks in investment banking and took over from Lloyd Blankfein, who steered the company through the 2008 financial crisis and its aftermath. 

Under Solomon, Goldman decided to shrink the consumer business that he once championed. Its retail operations lost billions of dollars and prompted the bank to sell assets and take writedowns.

The Wall Street powerhouse has since shifted its focus back to traditional mainstays of investment banking and trading, while also pushing growth areas of asset and wealth management.

"This week it seems like things are going well, next week things could be tough," Solomon told Reuters in December. "But we’re committed to a strategy, we have enormous support from our board, we have an incredible team and I think we’re making good progress, but more to do."

Waldron has been president and COO since 2018. He is seen as Solomon's closest lieutenant and previously served as co-head of investment banking, a role he assumed in 2014 after joining Goldman in 2000.

Solomon and Waldron were among the executives whose pay was cut by millions in 2020 after a graft scandal at Malaysian state fund 1MDB prompted the bank to pay a record $2.9 billion in the United States to settle investigations.

Solomon said in a statement at the time none of the past or current members of senior management were involved in, or aware of, the firm's participation in any illicit activity when Goldman arranged the Malaysian bond deals.

But the company's board still reduced compensation for some senior executives in light of the findings of the government and regulatory investigations, as well as the magnitude of the total 1MDB settlement.

(Reporting by Saeed Azhar, editing by Lananh Nguyen and Emelia Sithole-Matarise)