From: Reuters
Published April 10, 2008 02:24 PM

Goldman CEO says "say on pay" a bad idea

By Joseph A. Giannone

NEW YORK (Reuters) - Goldman Sachs Group Inc <GS.N> Chief Executive Lloyd Blankfein, who received about $70 million of compensation last year by some counts, said on Thursday that shareholder votes on executive pay would constrain the board and hurt the investment bank's ability to attract the best employees.

So-called "say on pay" initiatives, which allow shareholders to provide a nonbinding approval or rejection of a board's proposed pay package for senior executives, have become a hot topic among shareholder groups, pensions and other large investors focused on corporate governance issues.

In a spirited annual meeting held in a downtown Manhattan, a number of Goldman shareholders urged the board and investors to adopt an advisory vote as a tool to keep a lid on excessive pay. Advocates also argued the proposal would give shareholders a greater voice on an important matter, without binding directors.


Blankfein, in an extended response, expressed his concern that "say on pay" would limit directors in exercising their judgment.

Say on pay would "create a feedback loop. It would create a cloud, a constraint, a limitation on decisions that have been at the heart of what a board has done," Blankfein said.

The board, he said, needs to have the flexibility to weigh compensation packages and the market environment. He also expressed concern that decisions by board member could be judged by uninformed investors.

"Our compensation has been very well-correlated to performance," he said.

Goldman's shareholders apparently agreed, as the say on pay proposal was rejected, receiving approval by 43 percent of shares voted and 30 percent of shares outstanding.

Some speakers argued Goldman's compensation was enormously high. According to the proxy statement, Goldman's top five senior executives received roughly $250 million last year in salary, cash bonuses, stock awards and other compensation, excluding stock options.

For context, that haul was greater than JPMorgan Chase & Co's <JPM.N> initial fire-sale takeover bid of $236 million for Bear Stearns Cos Inc <BSC.N>.

Shareholder advocates upset about excessive CEO pay argue that advisory votes would let U.S. shareholders, like their European counterparts, ratify or express disapproval of pay packages.

Still, most shareholders, including Timothy Smith of proposal sponsor Walden Asset Management, noted that Goldman has performed well.

In the end, Goldman shareholders showed themselves to be largely satisfied with the company's management following a year when Goldman stock rose 12 percent, outperforming rivals, and when it generated record revenue and profit. All 12 directors won reelection, with 97 percent of votes.

(Reporting by Joseph A. Giannone, editing by Gerald E. McCormick)

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