Inch by inch

Goldman pulls corporate governance fast one, again

Goldman Sachs has pulled a corporate governance fast one again. The Wall Street giant has, for a second year, managed to persuade an uppity shareholder to drop a request to allow the firm's owners to vote on splitting the roles of chairman and chief executive. Goldman is, at least, attempting to strengthen its board. But it's at a glacial pace and the result of investor pressure. Giving shareholders a vote on the matter would be preferable.

This year's deal is with CtW Investment Group, a manager of more than $200 billion in assets associated with labour unions. It adds some tweaks to last year's agreement with the American Federation of State, County and Municipal Employees (AFSCME) to appoint a lead director. From now on, James Schiro will be empowered to set the agenda for board meetings, rather than just approve it, and write his own letter to shareholders in the annual report.

It's piecemeal stuff. And it comes only after the bank failed to convince a judge to throw CtW's proposal out of the proxy that shareholders will vote on at Goldman's annual meeting in Salt Lake City next month. The investment bank's lawyers tried to claim the proposal was "inherently vague and indefinite."

Such votes are usually pretty straightforward, though. Often, they even include language allowing a bank to defer splitting the roles for a time. That's the case with a proposal by AFSCME to be voted on by JPMorgan shareholders next month.

Goldman argues that the board has no policy either way about having a separate chairman and chief executive. Rather, directors have decided that Lloyd Blankfein is best suited to hold both positions - a stance they review every year. JPMorgan takes a similar line about boss Jamie Dimon.

Moreover, Goldman points to earlier votes on the matter that overwhelmingly supported the status quo. But this is not some distractive vote about how much land Goldman should or shouldn't donate to charity. It's an important element of corporate governance and one where opinions have shifted since the financial crisis. In the free markets Goldman surely espouses, allowing shareholders to make up their own minds ought to be a given.