Goldman Sachs Shareholders Are Steaming Mad
Shareholders of Goldman Sachs are flexing their muscle in response to management’s approval of record bonuses and executive compensation. The Wall Street Journal reported on Friday that investors in Goldman Sachs are expressing frustration in analyst meetings and in personal conversations with the Goldman board. Investors’ main concern is that per share earnings are down while executive compensation is up, way up! 2009 per share earnings are projected to be 22% lower than those in 2007, while employee compensation and bonuses will set a new record of at least $717,000 per employee in 2009.
Goldman attempted to allay investors’ frustration with statistics citing its strong, long-term growth. Goldman has generated a return of 159% over the past 10 years compared with negative returns for the S&P 500 average over the same time period. However, Goldman Sachs’ board members seem to forget that the company is owned by its shareholders. The decline in per share returns in the same year as record employee compensation is unacceptable. The investors ought to have proportional rewards for the company’s success.
As Nell Minow, a leading advocate for shareholders’ rights, wrote in a recent CNN op-ed, “It is time for America as investors and as citizens to be ruthless in forcing Wall Street to prove that the return on investment for every dollar spent on executive compensation provides competitive returns”
The lesson: Shareholders expect more. Plenty of Wall Street banks continue to carry out overly risky investment schemes and engage in business with shady and criminal characters (just see many of the posts on this blog). Following the precedent of disgruntled shareholders speaking up and engaging in discussion with Goldman Sachs, we hope that other investors will heed the call to question the practices of every major financial institution. The general masses can cry foul until the cows come home, but only investors have a vote on change and the protection of sound business practices. A stable, thriving economy will only be achieved with the solid voice of investors reining in the excessive practices of Wall Street. In today’s economy, investors must demand transparency, responsibility, and respect for the shareholders.
Assisted by Zach Kady
Steven N. Berk has over twenty years of litigation experience spanning both the private and public sectors. His practice ranges from representing Fortune 500 Companies, to consumers. Steven is based in Washington, D.C. and founded Berk Law in May 2009....
