Activist shareholder Harrington Investments objects to Blankfein’s package as ‘excessive.’
On May 24, Goldman Sachs’ shareholders will have their say on the company’s executive pay; the election of 10 directors, including the controversial James Johnson; and a handful of shareholder proposals. Given shareholders’ high-profile rejection of some pay packages, executive compensation at Goldman has been a focus. CEO Lloyd Blankfein is set to earn $12 million (or $16 million, if vested options are counted.)
That’s more than he earned in 2010, despite a worse performance. Activist shareholder Harrington Investments objects to Blankfein’s package as ‘excessive.’ Last week ISS Proxy Advisor Services disagreed, recommending shareholders approve the pay packages and generally siding with management on other issues.
ISS and Harrington agree on a different compensation related issue, Harrington’s proposal that Goldman executives be required to hold on to 75 percent of their Goldman shares for at least three years after leaving the company. Harrington argues the measure is needed to tie executives’ interests to the company’s long-term performance. Goldman responds that their current compensation structure achieves the same ends.
But Harrington isn’t the only Goldman shareholder seeking change at the annual meeting. Ruane, Cunniff and Goldfarb hope to remove Johnson from the board of Goldman because it is concerned about his character and judgment, as reflected in the corporate governance scandals at other companies he helped direct.
The firm, which owns Goldman through the Sequoia Fund and other accounts, highlights Johnson’s time at Fannie Mae, United Health Care and KB Homes, and his preferential treatment by the notorious Countrywide executive Angelo Mozillo. Again, ISS is siding with Goldman management on the issue, recommending Johnson’s reelection. ISS does flag his nomination as controversial and worthy of special attention, however.
Assuming Johnson is reelected this year, his future place on the board may be affected if a shareholder proposal from Evelyn Davis passes. Davis’s proposal would institute ‘cumulative voting’ at Goldman, which would give shareholders one vote for each share times the number of directors up for election, and allow those votes to be cast for one or more candidates.
As Goldman notes in its argument against the proposal, cumulative voting could enable a minority of shareholders to essentially elect a personal representative to the board. More relevant to Johnson, cumulative voting can also complicate removal of a director by minority shareholders. Nonetheless, ISS agrees with Davis and recommends voting for the proposal.
The final shareholder proposal to be voted at the Goldman annual meeting relates to lobbying. Shareholder Needmor Fund seeks an annual report on Goldman’s lobbying expenditures, which it says totaled at least $7.44 million in 2009 and 2010. Goldman opposes the report, arguing that it has conservative lobbying policies and sufficient disclosure. ISS recommends against this proposal.
Although ISS disagrees with Goldman management on two shareholder proposals, neither is likely to pass as they have already failed multiple times and have yet to garner even 30 percent. On the two big issues, ISS has sided with Goldman management. Will shareholders? We’ll find out on May 24.
