The Director Compensation Project: Goldman Sachs Group

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence.  While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting. 

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards.  Directors are not independent if they received over $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii).  This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes all compensation.  Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from The Goldman Sachs Group (NYSE:GS) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Lloyd C. Blankfein	600,000	0	0	262,657	862,657
Gary D. Cohn	600,000	0	0	225,156	825,156
John H. Bryan	476,004	0	0	15,000	491,004
Claes Dahlback	455,676	0	0	0	455,676
Stephen Friedman	476,004	0	0	20,000	496,004
William W. George	455,676	0	0	20,000	475,676
Rajat K. Gupta*	450,876	0	0	0	450,876
James A. Johnson	476,004	0	0	20,000	496,004
Lois D. Juliber	455,676	0	0	20,000	475,676
Lakshmi N. Mittal	450,876	0	0	0	450,876
James J. Schiro	307,087	0	0	20,000	327,087
Ruth J. Simmons*	450,876	0	0	20,000	470,876

*Director not standing for reelection at annual meeting.

Director Compensation.  During fiscal year 2009, the Goldman Sachs Board consisted of 12 directors. 10 of these directors were independent, non-employee directors. The board held 12 meetings during 2009 as well as a number of informal group posting sessions and discussions amongst themselves and with the Chairman and CEO. Each of the directors attended at least 75% of the board meetings and attendance at the board meetings averaged 95% as a group. The compensation committee met six times in 2009 with another four meetings in early 2010. Goldman Sachs has a compensation policy that each non-employee director owns at least 5,000 shares of common stock or vested Restricted Stock Units (RSU) within two years of becoming a director. Also, all RSUs held by a director may not be exercised until that director retires his or her position on the board. Director compensation was awarded on February 5, 2010 and included a $75,000 retainer as 487 vested RSUs each, a $25,000 committee chair fee as 163 vested RSUs to each committee chairman, and an annual grant of either 10,000 vested options or 1,250 vested RSUs and 5,000 vested options.

Director Tenure.  Mr. Blankfein has been Chairman and CEO since June 2006, formerly serving as President and COO since 2004. Mr. Mittal is Chairman and CEO of ArcelorMittal S.A., a company for which Goldman Sachs provides financial services. He is also on the boards of the European Aeronautic Defense and Space Company (EADS) and, until May 2, 2010, ICICI Bank Limited. Mr. Schiro was formerly CEO of PricewaterhouseCoopers LLP; he is also on the board of PepsiCo, Inc. and Royal Philips Electronics. Ms. Juliber is also on the boards of E.I. du Pont de Nemours and Company and Kraft Foods, Inc. Mr. Johnson also serves on the board of Forestar Group Inc., and Target Corp.; within the last five years he was also on the boards of Gannett Co., KB Home, Temple-Inland and UnitedHealth Group, Inc. Mr.  Bryan and Mr. Johnson have the longest tenure on the board, having served as directors since 1999.

CEO Compensation.  Mr. Blankfein received $600,000 in salary for 2009 and $9 million worth of RSUs deliverable as shares at risk. He also received $9,800 as part of the annual 401(k) matching program, $144 in term life insurance premiums, $56,927 in medical and dental plan premiums, $994 in long-term disability insurance premiums, $15,077 in executive life premiums, $57,203 worth of financial and benefits counseling services, and a car or car service valued at $70,413. From 1994-1997 Mr. Blankfein co-headed the Currency and Commodities Division, which later became the Fixed Income, Currency, and Commodities Division (FICC). From 2002 to 2004 he served as Vice Chairman of Goldman Sachs with management responsibility over FICC. In January, 2004 he became President and COO and in June, 2006 he was elected Chairman and CEO. Gary D. Cohn, President and COO, was the next most highly compensated executive. He received a salary of $600,000 for 2009 and $9 million worth of RSUS deliverable as shares at risk. He also received $9,800 as part of the annual 401(k) matching program, $144 in term life insurance premiums, $56,927 in medical and dental plan premiums, $994 in long-term disability insurance premiums, $9,840 in executive life premiums, $62,723 worth of financial and benefits counseling services, and a car or car service valued at $58,072.

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[sacs a main chanel]

Decent income