Review Long-Term Executive Compensation - TARP Companies

2010 – Goldman Sachs Group Inc.

 

 

WHEREAS: Goldman Sachs has repaid its Trouble Asset Relief Program (TARP) obligations to the U.S. Government and therefore is no longer legally required to consult shareholders via an Advisory Vote on Pay.

 

The leaders of the G20 nations recently adopted the Financial Stability Board’s pay guidelines (Principles for Sound Compensation Practices) which include criteria on the size and timing of bonuses.  Goldman’s compensation structure does not appear to be aligned with these international standards.

 

Goldman Sachs is returning to its past practice of paying huge bonuses having set aside an estimated $20 billion for bonuses - averaging $700,000 per employee.  It has been alleged the bonus structure encouraged risky behavior. 

There is real concern and anger among many average American citizens that executive compensation is out of control.  A 2009 study by Reda & Associates analyzing 200 companies’ proxies, found companies were generally making short-term incentives a bigger part of the compensation plan rather than less, and the practice of paying executives’ income taxes or gross-ups did not decline.

 

A report by the Special Inspector General for TARP indicates the federal rescue of other financial services firms may have contributed to Goldman Sachs’ current performance.  This revelation adds to growing questions about performance calculations in a period marked by dramatic taxpayer intervention in the markets and individual companies.

 

The Board Compensation Committee and our compensation consultants seem unwilling to put limits on executives’ compensation.  In fact, some feel our Compensation Committee is out of touch in letting compensation escalate to such levels. 

 

In order to do what it best for the long-term health of the corporation, the Board should be consulting with all stakeholders, including shareholders, rather than responding solely to consultants.

 

Our Board might benefit from thoughtful analysis by independent outside experts on the issue of trends in Goldman Sachs’ pay as well as the pros and cons of pursuing the present track. 

 

BE IT RESOLVED -- the shareowners request the Board establish an Independent Executive Compensation Review Panel to review the company’s long-term compensation, including bonuses, and compare it against industry trends.  The review shall include an analysis of the trends in Executive Compensation at our company and the impact on our company’s reputation, employees, relations with investors, political leaders and the general public.

 

The Panel shall be composed of persons who are independent of the company and drawn from a diverse cross-section of constituencies and viewpoints.

 

The Panel shall present its findings report to the Board Compensation Committee by October 2010 and a summary shall be available to investors by end of the year.  

 

Supporting Statement: We believe the establishment of an outside panel is important to provide a different perspective on pay philosophy and to provide an independent perspective to the Board. We believe this is necessary since our Board seems to have lost sight of what is fair and reasonable executive compensation in the midst of a historic economic crisis in which our company has admitted culpability.