Shareholders Challenge Goldman Sachs as It Prepares To Pay Record Bonuses

/PRNewswire/ -- Goldman Sachs is issuing its much anticipated earnings announcement on Thursday (October 15, 2009), and is expected to set aside up to $20 billion for executive bonuses. In view of this action coming so quickly on the heels of the federal bailout money issued to the company during the height of the financial crisis last year, investors are responding by mounting major proxy initiatives.

The Nathan Cummings Foundation and the Benedictine Sisters of Mt. Angel, Oregon announced today that they have filed a shareholder resolution urging the Board to review pay disparity at the company and analyze the appropriateness of its spiraling pay packages - packages that have an unprecedented impact on Wall Street compensation in general,

The resolution, which is expected to gather more co-sponsors, has been filed early to challenge Goldman Sachs as the Board makes final decisions on bonuses. It was filed to appear in the 2010 proxy and be voted on at the stockholder's meeting. Goldman Sachs had received resolutions calling for shareholders to have an Advisory Vote on executive compensation that received a 46% vote in favor, but the Board has resisted implementing even that modest reform. Other investors may also file resolutions calling for a "say on pay" or for separation of board chair and CEO positions at Goldman Sachs.

Laura Shaffer, who is director of shareholder activities of the Nathan Cummings Foundation and one of the resolution's sponsors, stated: "This request is especially timely as Goldman Sachs rushes to pay huge bonuses, setting an example that many Wall Street firms will no doubt strive to emulate. As shareholders, the ripple effects of this extraordinary compensation are especially concerning. Executive compensation accounts for a considerable portion of aggregate earnings and as firms like Goldman hand over ever larger sums to their executives, these spiraling pay packages will have increasingly significant impacts on investors' returns."

Sister Judy Byron, who coordinates the faith-based Northwest Coalition for Responsible Investment and is a longtime proponent of this resolution, said: "Goldman Sachs' announcement of record bonuses is a stark reminder about how executive compensation is spiraling out of control for many firms. It is important that citizens and shareowners both act as voices of reason. As Fortune reminded us in 2007, top executives earn 364 times the pay of the average worker. CEO pay increases significantly for many executives even in rough times, while layoffs skyrocket and pay for average employees stagnate.

Laura Berry, executive director of the Interfaith Council on Corporate Responsibility, said: "As prudent investors, we have a responsibility here to act as the conscience of Wall Street, especially when it fails to do so on its own. How is it possible that the year after billions of taxpayer's dollars helped companies like Goldman Sachs return to financial health, this company shows absolutely no restraint? Goldman Sachs is poised to become the poster child of the company that drives income disparity in the United States."

FULL RESOLUTION TEXT

Recent events have increased concerns about the extraordinarily high levels of executive compensation at many U.S. corporations. Concerns about the structure of executive compensation packages have also intensified, with some suggesting that the compensation system incentivized excessive risk-taking.

In a Forbes article on Wall Street pay, the director of the Program on Corporate Governance at Harvard Law School noted that, "compensation policies will prove to be quite costly--excessively costly--to shareholders." Another study by Glass Lewis & Co. declared that compensation packages for the most highly paid U.S. executives "have been so over-the-top that they have skewed the standards for what's reasonable." That study also found that CEO pay may be high even when performance is mediocre or dismal.

In 2008, Federal Appeals Court Judge Richard Posner stated that, "executive pay is out of control and the marketplace cannot be trusted to rein it in." Legislative attempts to address executive compensation include the Excessive Pay Shareholder Approval Act, which mandates that no employee's compensation may exceed 100 times the average compensation paid to all employees of a given company unless at least 60% of shareholders vote to approve such compensation.

A 2008 piece in BusinessWeek revealed that, "Chief executive officers at companies in the Standard & Poor's 500-stock index earned more than $4,000 an hour each [in 2007]." It also noted that an S&P 500 CEO had to work, on average, approximately 3 hours in 2007 "to earn what a minimum wage worker earned for the full year."

A September 2007 study of Fortune 500 firms showed that top executives' pay averaged $10.8 million the previous year, or more than 364 times the pay of the average U.S. worker. Another study by the Economic Policy Institute found that between 1989 and 2007, average CEO pay rose by 163% while the wages of the average worker in the United States rose by only 10%.

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.

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Resolve to Invest Wisely in 2009

/PRNewswire/ -- As the struggling economy heads into the New Year, investors continue to be unsure of what their financial future may hold. Despite the stock market's tumultuous rise and fall, there remain basic investment truths for making sound investment resolutions no matter what 2009 has in store.

New Year's Investment Resolutions

1. Make sure your investment advisor does not have disbursement authority or other access to your funds beyond trading or fee deduction.

2. Find out exactly how your investment professional is paid; insist on a percent-of-assets fee or a flat fee arrangement only.

3. Don't look at your statements or holdings more than once a month; investing is a long-term game. Find a professional and a long-term strategy you're comfortable with and let time work its magic.

4. Ensure your investment professional holds the CFA (Chartered Financial Analyst) designation -- the worldwide gold-standard for investment analysis and investment portfolio management.

5. Review your portfolio for high-load funds or other expensive investment products; there is usually very little reason to hold high-load investment products. They are almost never in your best interest.

6. Insist on annualized performance results prepared in accordance with GIPS (Global Investment Performance Standards). If your investment professional can't provide annualized percent returns for your portfolio(s), net of fees, you won't know how you're doing.

7. Don't allow the negative psychology of the current market to trick you into selling your stocks at exactly the wrong time. Current valuations may represent the greatest buying opportunity in a long time, although risks clearly remain.

8. Have faith in the U.S. economy. The world is not ending and the country is not going to collapse. We will recover.

9. Recall that you must outpace inflation in the long-run. Stocks are the single best investment vehicle for potentially beating inflation over long periods of time.

10. Assess your spending and saving habits. Eliminate and trim spending where feasible. Spend less on unnecessary items. And always ask yourself if the purchase you are about to make is necessary or impulse.

Eads & Heald Investment Counsel has a 21-year history of managing customized investment portfolios through periods of economic euphoria and despair. See http://www.eadsheald.com/ .

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