Big investor to oppose re-election of a Goldman Sachs director
In the latest rebuke of eye-popping pay packages on Wall Street, a major institutional investor is taking the rare step to oppose the re-election of a Goldman Sachs board member who approves compensation for many of the bank’s top executives.
The managers of Sequoia Fund announced plans this week to vote against James A. Johnson, a longtime Goldman director and a former chief executive of Fannie Mae, and urged other shareholders to follow suit. The push comes days after Citigroup shareholders rejected the bank’s $15 million payout to its chief executive, Vikram S. Pandit.
The critique of the Goldman director also coincided with an unusual announcement by Barclays, the big British bank, which said Thursday that its executives would forfeit portions of their bonuses if the firm failed to meet certain profitability goals.
The moves echo the concerns among regulators, lawmakers and others that bank executives continue to emphasize their own compensation over the well-being of the institutions more than three years after the financial crisis.
That displeasure now appears to be broadening to include even mainstream investors like the Sequoia Fund. The $5.7 billion fund, which is an investor in companies like Warren E. Buffett’s Berkshire Hathaway, has long been one of Wall Street’s best performers. And in the case of Citigroup, the nonbinding “no” vote on pay came at the hands of major institutional investors.
“A garden-variety investment manager doesn’t typically step out like this,” said Charles M. Elson, a corporate governance expert at the University of Delaware. He said that shareholder uprisings more often come from outspoken corners of the financial industry — groups like public pension funds and activist investors with social agendas. But, he said, “When you see mediocre results and large pay, you’re going to see some complaints.”
As one of the most powerful names on Wall Street, Goldman has come under fire before over pay, even as it seeks to rein in compensation. The firm recently announced that its chief executive, Lloyd C. Blankfein, earned $12 million for his work in 2011 — roughly a 35 percent decline from 2010 — though the bank’s stock declined more than 45 percent last year. Over all, the firm’s compensation was 39 percent of net revenue, which is not outsized compared with competitors.
Still, 27 percent of shareholders voted to reject the bank’s compensation plan at the firm’s annual meeting last year. While well short of the votes needed to issue a nonbinding rebuke, it was a strong showing.