Goldman braces for shareholder fury

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- Hell may hath no fury like shareholders of Goldman Sachs scorned.

Goldman investors are converging on lower Manhattan for the firm's annual shareholder meeting. Typically a rather mild-mannered affair, the gathering is poised to turn contentious given the scrutiny Goldman has been under in recent weeks.

blankfein_090211.03.jpg
One of the more-closely watched proposals on this year's shareholder ballot is whether to split the role of chairman and CEO, which are both currently held by Lloyd Blankfein.
Goldman Sachs: 7 power players
Lloyd Blankfein, Fabrice Tourre and 5 other Goldman Sachs managers appeared on Capitol Hill to defend the company's mortgage market moves.

"There are going to be some angry shareholders, no doubt," said Les Satlow, a portfolio manager at the Massachusetts-based Cabot Money Management, whose firm owns shares of Goldman Sachs. "Some of them will want blood from management."

More than that, shareholders will be looking for answers about the various legal woes the company is now facing.

Last month, the Securities and Exchange Commission charged the company and one of its employees with defrauding investors in the sale of securities tied to subprime mortgages. Goldman has repeatedly denied the charges, adding it plans to defend itself in court.

Since then the company has reportedly become the subject of a federal criminal investigation. There has also been a plethora of civil suits filed against Goldman.

Experts think Goldman's top executives will acknowledge the firm's troubles, but don't anticipate any major revelatory statements since the company is facing ongoing litigation.

"I'd be surprised if they have very much to say," said Adam Kanzer, managing director and general counsel of Domini Social Investment, a mutual fund firm that is sponsoring a shareholder ballot measure that would require the company to be more transparent about its political contributions.

This year, a total of eight proposals will be up for a vote, including one that would require the company to split the role of chairman and CEO, both of which are currently held by Lloyd Blankfein

Blankfein has become the public face of the embattled firm and the target of much criticism.

Last week, he endured a brutal line of questioning from Senate lawmakers about Goldman's dealings leading up to the crisis, including allegations the company bet aggressively against the U.S. housing market and made as much as $3.7 billion in the process.

While public outrage at Goldman and Wall Street is close to its highest point since the crisis erupted, it remains unclear whether a significant number of shareholders will vote to strip Blankfein of his chairmanship. But it may not take a majority vote to convince the company's board to make changes

Laura Berry, executive director of the Interfaith Center on Corporate Responsibility, which represents 300 faith-based institutional investors, including several groups sponsoring shareholder proposals at Friday's meeting, said that if Blankfein were to receive at least a 30% vote in favor of splitting the chairman and CEO role, that could spell trouble for the Goldman chief.

"My sense is that when you start to see a third of shareholders saying we think changes need to be made, I think you have to really look at your governance structure," she said.

A number of Goldman's peers have already separated the role of CEO and chairman, including Bank of America (BAC, Fortune 500) and Morgan Stanley (MS, Fortune 500).

Shareholders will also be granted an advisory vote on the fiscal year 2009 compensation of Goldman's top five executive officers, a so-called "say on pay."

Late last year, the company announced its 30-member management committee had declined to accept any cash bonuses for the year, amid public outrage over Wall Street bonuses.

Blankfein earned a salary of $600,000 and 58,381 shares of company restricted stock, which was worth about $9 million at the time.

Such concessions might have soothed shareholder activists were it not for the precipitous drop in Goldman's stock in recent weeks.

Since the SEC first brought civil fraud charges against the company, investors have collectively lost more than $19 billion, erasing a substantial amount of gains it had achieved late last year as the financial sector roared back.

With Goldman's legal woes mounting by the day, analysts have been reluctant to recommend the stock. Some have even cut their rating.

One easy defense for Goldman in all this is the company's performance. Last quarter, it earned $3.4 billion, easily shattering Wall Street estimates.

But with the firm under such scrutiny, now might be the time for Goldman executives to just sit back and take its lumps from irritated investors.

"If they are wise, they will be as candid as they can and let shareholders vent," Satlow said. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,065.43 -56.58 -0.33%
Nasdaq 4,558.79 -10.83 -0.24%
S&P 500 1,995.49 -4.63 -0.23%
Treasuries 2.33 -0.03 -1.44%
Data as of 11:31am ET
Company Price Change % Change
Apple Inc 102.32 0.19 0.19%
Bank of America Corp... 16.05 -0.15 -0.93%
Facebook Inc 74.05 -0.58 -0.78%
Pfizer Inc 29.48 -0.00 -0.02%
Yahoo! Inc 38.51 0.33 0.86%
Data as of 11:16am ET

Sections

Dollar General still wants to buy Family Dollar and says any antitrust issues are 'manageable.' More

Former Fed chief Ben Bernanke believes the 2008 financial crisis was the worst in global history, topping even the Great Depression. More

Snapchat has gotten a $20 million funding round from Kleiner Perkins, valuing the company at $10 billion, according to the Wall Street Journal. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.