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The New York-based Nathan Cummings Foundation is seeking the support of other Goldman Sachs Group Inc. (GS) shareholders for a proposal that would ask the company's compensation committee to produce a report comparing the earnings of the company's top executives to average employees -- and assess whether pay might be excessive and in need of change.But the foundation tells Reuters that Goldman informed it that it would ask the SEC to block the proposal from appearing on the proxy ballot sent to shareholders -- effecting stopping the plan dead in its tracks.
Given how modest the proposal really is -- it wouldn't produce any changes in the way executives are paid: just a report -- it's puzzling that the company is looking to the SEC to allow it to block it from appearing on the ballot.
In an op-ed piece in today's Wall Street Journal, Yale Law School professor Jonathan Macey decries governmental efforts to curb pay at banks: "We should continue to let shareholders pay their managers whatever and however they want."
But the banks can't have it both ways. They can't fight their shareholders' right to have their ideas presented to other shareholders and simultaneously insist that the government stay out of it because shareholders are on top of it. Shareholder democracy in America is a joke, and the "let shareholders take care of it" argument fails to recognize that.
The solution is for the government to stay out of the executive compensation business: but rigorously enforce the right of activist shareholders to stay in it. Blocking Goldman's effort to remove the Cummings Foundation's proposal from the proxy would be a great place for the SEC to start.
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Reader Comments (Page 1 of 1)
1-13-2010 @ 5:41PM
rv said...
I wholeheartedly agree with this article. Let the shareholders vote on how they want the employees to be paid. for companies that received no tarp money, or already gave it back, its not the governments fucking business.
Whether they should be paid less, Im not so sure of. On wall street, your base salary is a fraction of your entire salary. The bonus is a large portion of your estimated salary. This is what regular americans don't understand, is that the way it works is that bonuses are how bankers get paid.
1-13-2010 @ 9:05PM
Dan Barnett said...
The question then becomes whether the shareholders can impact the compensation package; given the large number of shares owned by the BOD and institutional investors. We've all read the proxy statements that are slanted heavily in the direction the BOD wants us to vote.
1-13-2010 @ 9:40PM
rv said...
Dan, there is nothing stopping the institutional investors from joining in.
Anyway, if goldman were to lower compensation, there would be an exodus of employees to other firms, or startups.
1-14-2010 @ 3:23PM
ij70 said...
rv, I do not see an exodus happening. One, GS recognized as one of top players in its game, having GS name of your business card is advantageous at this time. Two, where would these people go, there are plenty unemployed financial specialists already.
1-15-2010 @ 3:03AM
rv said...
ij, you are probably right. The ones that would leave would be guys that know they can bring in the green ie the big dogs. The rest, as you said, would want the stability and the name of gs.
But you want to keep those big dogs.