In the News

January 24, 2013
The Wall Street Journal

Goldman Sachs Fights Proxy Plan

By: Liz Moyer

Goldman Sachs Group Inc. is trying to block a shareholder proposal for an independent chairman of its board from appearing on the proxy ballot, following an effort last year against a similar proposal by another activist group that resulted in the company naming a lead outside director.

CtW Investment Group, which works with pensions sponsored by a group of unions with 5.5 million members and $200 billion in assets, sent a letter to the Wall Street firm on Dec. 13 detailing its proposal, which calls on the board to adopt an independent chairman who hasn't been an executive officer of Goldman and hasn't had other affiliations or connections with the bank.

Goldman, in a letter dated Jan. 16, asked the Securities and Exchange Commission to allow it to exclude the proposal from its 2013 proxy on the grounds that it is "vague."

Companies routinely ask the agency to take no enforcement action for omitting shareholder proposals from their proxies.

A spokesman for Goldman declined to comment.

Separately, a federal jury in Boston cleared Goldman on Wednesday of any liability in a civil case stemming from the company's advisory role in the 2000 sale of Dragon Systems Inc., a software company, to Lernout & Hauspie of Belgium.

The founders of Dragon, a speech-recognition company, had sought several hundred million dollars in damages. They accused Goldman of failing to spot issues that eventually led to Lernout's collapse amid questions about its accounting.

Chairman independence has become a popular topic among institutional investors, but their success in the proxy voting process has been mixed. At Goldman, shareholders in recent years have made several attempts to separate its chairman and chief executive roles, now held by Lloyd Blankfein.

During last year's proxy season, Goldman negotiated behind the scenes with the pension plan for the American Federation of State, County and Municipal Employees over its proposal for an independent chairman.

Afscme's Employee Pension Plan, which has $850 million of assets, ultimately withdrew its proposal after Goldman agreed to appoint a lead outside director. That followed two shareholder proposals in 2010. Goldman got one excluded from the proxy because it duplicated the other, which was then voted down by shareholders.

In April, Goldman named former insurance executive James Schiro as the lead outside director. Before that, Goldman had a presiding director of its board, John Bryan, who retired last year.

But an independent chairman is more powerful than a lead outside director, said Bernard Black, a professor at Northwestern University School of Law. Separating the jobs of chairman and chief executive, as is now common in the U.K., also can add a layer of oversight and accountability at a company.

For a CEO, however, losing the chairman's title means losing some power on the board. "The chairman has more agenda-setting power," he said. "Having a separate chairman can change the dynamic in the board room."

Michael Pryce-Jones, a senior analyst for CtW Investment Group, said Goldman's investor-relations department had discussed the proposal with them, but following the no-action letter to the SEC, those discussions have been suspended.

The call for an independent chairman is one of five proposals that Goldman is seeking SEC permission to keep off its proxy. The others seek a human-rights committee, a rule change to allow a simple majority to decide shareholder votes, a report on Goldman's lobbying activities and a study of "massive expenditures on political contributions" by the company, its workers and related political action committees, or PACs.