Goldman Should Strip Blankfein Of Chairmanship, Pension Fund Says

A pension fund representing U.S. government employees has filed a shareholder proposal to strip Goldman Sachs Group Inc Chief Executive Lloyd Blankfein of his other post as chairman.

The pension plan of the American Federation of State, County & Municipal Employees said on Wednesday an independent chairman would provide checks and balances in the power structure at the largest U.S. investment bank.

Blankfein has also come under attack from activist investors and corporate governance advocates, but he retains the loyalty of Goldman's board. Shareholders supported him at Goldman's annual meeting in May.

Blankfein, who turns 58 next week, has been chairman and CEO since 2006. The bank has had one person serving as its head since Jon Corzine left in 1999 and Henry Paulson, Blankfein's predecessor, took over.

AFSCME said splitting the roles of CEO and chairman might have prevented Goldman from getting into trouble for its actions leading up to the financial crisis and will improve its stock performance going forward.

``A strong, independent Board chair would focus Goldman on generating long-term value for its shareholders,'' AFSCME President Gerald McEntee said in a statement.

Goldman spokesman Stephen Cohen said a similar resolution was defeated in 2010, with 81 percent of shareholders voting against it.

``We think we have a robust governance structure in place, with a very effective independent lead director,'' said Cohen. ''We always listen to our shareholders, so it is disappointing that AFSCME decided to go to the media before raising the issue with us.''

Goldman shares are down 38 percent this year, compared with a decline of 43 percent for its chief rival, Morgan Stanley . The other four biggest U.S. banks are down 21 percent to 48 percent.

AFSCME directly holds 7,101 shares of Goldman, worth $741,000 at current market prices, according to pension fund spokesman Chris Fleming. AFSCME's 1.6 million members own 2.5 percent of Goldman's outstanding shares, worth $1.325 billion.

AFSCME pointed to the legal bills Goldman shareholders have had to pay for its activities leading up to the crisis.

Goldman paid $550 million to settle fraud allegations with the U.S. Securities and Exchange Commission last year, related to a toxic derivatives deal it sold to investors. Goldman did admit or deny wrongdoing but acknowledged making mistakes in its marketing materials.

The bank paid $726 million in legal fees in 2010 and forecast $2 billion worth of further legal losses in a regulatory filing last month.

Goldman is now contending with further regulatory scrutiny stemming from a report by the Senate Permanent Subcommittee on Investigations that highlighted conflicts of interest and accused the bank of profiting at the expense of clients.

Blankfein was grilled during a tense hearing the subcommittee held last year. Senator Carl Levin, who led the inquiry, has said Blankfein lied to Congress by saying Goldman was not short the housing market.

While shareholder proposals are rarely a shoo-in, Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said that having an independent chairman has become a standard industry practice, and executives who resist shareholder calls can sometimes lose out.

Bank of America Corp chief Ken Lewis faced off against investors in 2009 and lost: Shareholders voted to separate the posts of chairman and CEO. Lewis remained CEO but lost the port of chairman. He left the bank later that year.

``Goldman has been under fire and I'm not surprised they got this resolution,'' said Elson. ``The question is, do they react appropriately to it? Goldman has not shown itself receptive to these sorts of things in the past. I hope they reconsider.''

Goldman shares were up 90 cents to $104.99 in afternoon trade. (Reporting by Lauren Tara LaCapra in New York; editing by John Wallace)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[AcademicFreedom]

06:42 PM on 09/28/2011

There will always be a tribal dude leading Goldman and there will always be tribal dudes leading the Fed Board and the majority of Fed Bank Presidents and the FOMC will always be tribal dudes. Get rid of Blankfein and another tribal dude will take his place.

[humanbeing-rick]

01:26 AM on 09/16/2011

If the board continues to support Blankfein and his cronies, then they are just as corrupt, and should also be removed. Throw out the cronies!

[humanbeing-rick]

01:24 AM on 09/16/2011

I would be embarrassed to own any Goldman-Sachs stocks, and my conscience would force me to dump it like a hot potato, after their arrogant and mischievous behavior.
I only invest in companies that I can support in good conscience, and that are good for America.
I would expect the same of any American patriot.

[Lauteur Calme]

07:53 PM on 09/15/2011

As a distant observer, it seems that the deliberate and catastroph­ic mispricing of risks in mortgage backed securities sold by Wall St. throughout the world, is one of the most egregious, crafty, successful and fraudulent acts ever perpetrate­d to investors!

As incompeten­t U.S. politician­s (i.e., Paulson, Bush, Cheney, Levin, Shelby, Dodd, Bernake, Geithner, Clinton, Ruben, Greenspan) did nothing to prevent it, their Wall St. cronies & lobbyists laughed their way to the bank by betting against the same structured products in which they sold throughout the world.

Perhaps, the central question is how could politicians and bankers rape and pillage the financial system of a country for so long through deception and fraud without being accountable? (i.e., think 401k, real estate, giving millions of tax payer $ to countries(Israel, Egypt, Pakistan, Jordan, Kenya, Mexico, South Africa, Nigeria), bailing out N.Y.C. in the 70's, Paulson using tax payer $ for what in essence was a coup d'etat of the U.S. Treasury, etc...)

Wow, isn't capitalism great in the U.S.?

As a Chinese economist recently stated, where ever there is wealth in the world, Wall St. will find a way to steal it while politician­s do nothing to prevent it...!

The stench of the financial crisis created by Wall St. and allowed by U.S. politician­s permeates from Shangai to Dubai...!

[knewsreply]

06:36 PM on 09/15/2011

Will any of the present/old CEOs of financial institutions be left when this purge to eliminate the largest abusers is complete?

[paid troll]

05:34 PM on 09/15/2011

take the funds OUT of goldman sachs. that's the only language they comprehend.

[paid troll]

05:34 PM on 09/15/2011

here's an idea, invest your pension with ANOTHER firm. that will get goldman's attention real quickly.

[Opus Loki]

01:08 PM on 09/15/2011

Send the IRS after all of them first. Have them go through every thing they ever put their grubby little mitts on. That will give the Justice Depatment time to build good, solid cases.

[irishkids1234]

11:30 AM on 09/15/2011

Lewis and Blankfein.......death and destruction (of the American system).....tomato and tomaaatoe....lets call the whole thing off

[Zinfendale]

12:08 PM on 09/15/2011

... but they're only doing God's work

[realorpretend]

10:49 AM on 09/15/2011

What percent of voting power do these pension funds hold? If it's enough, or, if they can rally up other voters and create a 2/3rd's or majority (whatever is needed in its bylaws) then he has to.

"wanting someone to do something which is allowed in the laws can't do much.

[american-dolt]

09:48 AM on 09/15/2011

They told him to get on the next flight back to Hades.

[artist-53]

08:06 AM on 09/15/2011

Would love to see Banks be held accountable.Unfortunately, they're probably part of the backdrop of what governs governments around the world.

[Zinfendale]

12:09 PM on 09/15/2011

We need to change that - somehow.

[Carl Caroli]

07:09 AM on 09/15/2011

Blankfein is a menace to society. His values are not American, he is loyal only to himself and his wealthy friends.

[HellBank]

05:24 AM on 09/15/2011

All banksters need to stripped. Then covered in honey and staked out to an ant pile.

[NYnotLiberal]

01:29 AM on 09/15/2011

Is it my imagination, or is Blankfein starting to look more and more like Jim Norton?

[grizzly bear55]

07:23 AM on 09/15/2011

He looks more like Gargamel from the Smurfs, the bad guy with the black cat.

[Opus Loki]

12:56 PM on 09/15/2011

LMAO! Gargamel...hahahaha