Exclusive: Goldman deal with union group lets Blankfein keep dual roles

Wed Apr 10, 2013 6:21pm EDT
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By Ross Kerber

(Reuters) - For the second year in a row, Goldman Sachs Group Inc fended off a shareholder proposal that could have led to a messy public vote to strip Chief Executive Lloyd Blankfein of his chairman's title.

By striking a deal for modest changes to the company's governance policies, Blankfein again potentially avoided the kind of embarrassment suffered by Jamie Dimon, CEO and chairman of JPMorgan Chase & Co, who faced substantial opposition on a similar vote last year, or Citigroup Inc's then-CEO Vikram Pandit, whose executive pay plan was rejected by shareholders last year.

CtW Investment Group, an adviser to union pension funds with $250 billion of assets, said on Wednesday it agreed to withdraw its proxy proposal seeking a split after the company agreed to give Goldman's lead director, James Schiro, new powers such as setting board agendas and writing his own annual letter to shareholders.

"It clearly is a compromise. I don't see how either Goldman or the unions came out way ahead," said Ralph Cole, senior vice president at Portland, Oregon, investment firm Ferguson Wellman Capital Management, which does not own shares in Goldman. "The only person who 'won' is Blankfein. He continues to hold the dual role."

Unions and other activists have made it a priority to try to split the chairman's and CEO's roles at many companies to improve oversight. JPMorgan faces a challenge on Dimon's role again this year from a coalition of public-sector worker pension funds, for instance.

Already many companies are moving in that direction. Among those in the Standard & Poor's 500 index, 43 percent split the Chairman and CEO jobs as of November, 2012, up from 25 percent 10 years earlier, according to a survey by executive search firm Spencer Stuart. Just 18 of the companies had a formal policy requiring the split of roles, however.

Governance experts praised the Goldman deal as likely to improve oversight and probably the best terms that proxy-measure sponsor CtW could have achieved.

"From the shareholder point of view, I think this is the best real deal they could get," said Paul Hodgson, an independent governance analyst in Maine. Winning a shareholder vote would have been difficult given how many Goldman employees hold stock in the firm, he said.   Continued...

Traders work on the floor of the New York Stock Exchange near the Goldman Sachs stall July 16, 2010. REUTERS/Brendan McDermid