Goldman Sachs Shareholders Rebuff Firm’s Board for First Time
By Christine Harper
May 9 (Bloomberg) -- Goldman Sachs Group Inc.
shareholders rebuffed the board of directors for the first time since the firm went public in 1999, voting to back a proposal that would let a simple majority enact changes at the company.
“It’s really an arm-wrestle between the board and shareholders in terms of who will have a say,” said Eleanor Bloxham
, president of the Corporate Governance Alliance
in Columbus, Ohio. The vote is “a major signal from shareholders in terms of their involvement,” she said.
Goldman Sachs, based in New York, requires a vote of 80 percent of outstanding shares to take action such as removing a director or amending by-laws. It had argued that the rule protected minority investors from “coercive” tactics, including a potential change in control of the firm.
, Goldman Sachs’s chairman and chief executive officer, faced more than an hour of questioning from shareholders at the company’s annual meeting yesterday after the stock dropped 61 percent last year and the company took $10 billion of U.S. bailout funds. Goldman Sachs was the most- profitable and highest-paying securities firm before converting to a bank last year amid the worst financial crisis since the Great Depression.
Goldman Sachs lags behind some competitors in adopting simple majority voting. Morgan Stanley
, which was the second- biggest U.S. securities firm after Goldman Sachs until both converted to banks last year, proposed an end to the so-called supermajority requirement at last year’s annual meeting.
The proposal by California-based investor James McRitchie
won support from 75 percent of shares voted and 54.7 percent of outstanding shares, said Greg Palm
, co-general counsel at Goldman Sachs.
It will require an amendment to the company’s charter that will need investor approval at next year’s shareholder meeting, said spokesman Lucas van Praag
. It was the first time shareholders rejected a board proposal since Goldman Sachs went public a decade ago, he said.
If it’s approved in 2010, Goldman Sachs
, the fifth-biggest U.S. bank by assets, will have to eliminate any requirements in which more than a majority vote of shareholders is required to take action.
Two proxy advisory firms, RiskMetrics Group and Glass Lewis & Co., advised shareholders to support the proposal. The Council of Institutional Investors, a trade group that represents pension funds with combined assets exceeding $3 trillion, also considers simple majority voting among “best practices.”
“The majority vote standard resonates with many shareholders right now,” said Amy Borrus
, the deputy director of the Council of Institutional Investors. “Investors want to be empowered to influence the board that is supposed to represent their interests.”
All 12 of the Goldman Sachs’s board members won re-election at the meeting and three other shareholder proposals were rejected, the firm said.
Shareholders also voted in favor of the company’s executive compensation for 2008 in a non-binding advisory vote that was a requirement because the company received $10 billion from the U.S. Treasury’s Troubled Asset Relief Program last year.
A shareholder effort to get such a “say on pay” vote included on the proxy last year was opposed by the board and failed to win a majority of votes.
“It’s virtually inevitable that Congress is going to mandate this” say on pay requirement in the future, Timothy Smith
, a senior vice president at Walden Asset Management in Boston, said at the meeting. “We are appealing today that the board exercise leadership and adopt it as your own policy.”
To contact the reporter on this story: Christine Harper
in New York at email@example.com
Last Updated: May 9, 2009 00:01 EDT