Saturday, April 21, 2012

Buffett-linked fund presses Goldman to oust director

NEW YORK: In the latest rebuke of eye-popping pay packages on Wall Street, a major institutional investor is taking the rare step of opposing 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 Mr James Johnson, a long-time Goldman director and former chief executive of Fannie Mae, and urged other shareholders to follow suit.
The push comes days after Citigroup shareholders rejected the bank's US$15 million (S$19 million) payout to its chief executive, Mr Vikram Pandit.
The critique of the Goldman director also coincided with an unusual announcement by Barclays, the big British bank, which said on 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 and lawmakers, amid public outrage, that bank executives continue to emphasise 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 US$5.7 billion fund, which is an investor in companies like Mr Warren Buffett's Berkshire Hathaway, has long been one of Wall Street's best performers. And in the case of Citigroup, the non-binding '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 Mr Charles Elson, a corporate governance expert at the University of Delaware. However, 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, Mr Lloyd Blankfein, earned US$12 million for his work last year - a roughly 35 per cent decline from 2010 - though the bank's stock declined more than 45 per cent last year.
Overall, the firm's compensation was 39 per cent of net revenue, which is not outsized compared with competitors.
Still, 27 per cent 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 non-binding rebuke, it was a strong showing.