Don’t Ask, Don’t Tell: Says Goldman Sachs to Shareholders, Part I

In September of 2009, the Nathan Cummings Foundation and the Benedictine Sisters of Mt. Angel, shareholders of Goldman Sachs Group, Inc. (“Goldman”)(the “Shareholders”), submitted a resolution  on pay disparity. The Shareholders hoped that Goldman would produce a report by October of 2010 examining and explaining Goldman’s pay practices. Accordingly, the Shareholders proposed that Goldman shareholders be permitted to vote on the following:

"RESOLVED: shareholders request the Board’s Compensation Committee initiate a review of our company’s executive compensation policies and make available, upon request, a summary report of that review by October 1, 2010 (omitting confidential information and processed at a reasonable cost). We request that the report include –

1. A comparison of the total compensation package of senior executives and our employees’ median wage in the United States in July 2000, July 2004 & July 2009.

2. An analysis of changes in the relative size of the gap and an analysis and rationale justifying this trend.

3. An evaluation of whether our senior executive compensation packages (including, but not limited to, options, benefits, perks, loans and retirement agreements) are “excessive” and should be modified to be kept within reasonable boundaries.

4. An explanation of whether sizable layoffs or the level of pay of our lowest paid workers should result in an adjustment of senior executive pay to 'more reasonable and justifiable levels' and whether Goldman Sachs should monitor this comparison going forward."

The Shareholders asked that the resolution be mailed to shareholders in advance of the May 2010 annual meeting.  This would allow all Goldman shareholders to vote “by proxy” without the need to attend the annual meeting in person.  As a matter of law, publicly-held corporations, like Goldman, are required to include shareholder resolutions in these mailings and to allow shareholders to vote on them subject to a small list of exceptions.  According to a January 11th Reuters story, last Friday, January 8^th, Goldman informed the Nathan Cummings Foundation that it was seeking SEC permission to exclude the proposal from the proxy mailing. In requesting a “no action” letter from the SEC, Goldman is asking the government to promise not to take legal action against the firm for violating the federal securities laws in its refusal to put the resolution to vote.