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Apr 10, 2013

Goldman Sachs reaches deal to avert vote on chairman/CEO role

Agreement boosts powers of lead independent director in return for withdrawing vote proposal

Goldman Sachs has averted a vote on whether to force Lloyd Blankfein to resign as chairman and continue to hold only his CEO role by offering the lead independent director greater influence on the board.

The investment bank reached an agreement with activist investor CtW Investment Group, which will withdraw its proposal to split the roles of CEO and chairman before the annual shareholder meeting. In return, Goldman Sachs has agreed to give lead independent director James Schiro the right to address shareholders directly in the annual proxy statement, set the board agenda and increase the number of board meetings for outside directors.

‘We’ve had a constructive engagement with our shareholders, and believe the enhancements we have made further solidify the independence of the board,’ Goldman Sachs says in a press statement.

The agreement follows last month’s failed attempt by Goldman Sachs to persuade the SEC to allow it to take the vote off the agenda. The investment bank argued that the vote proposal by CtW was ‘too vague’ and would confuse shareholders, but the SEC ruled that the proposal was sufficiently clear and could go ahead.

‘At this point we felt like Goldman Sachs made a very good-faith effort in enhancing the role of lead director,’ Dieter Waizenegger, executive director of CtW, told the Financial Times. ‘We gained enough comfort at this point that the lead director [could provide] a check to the chief executive’s role on the board.’

The agreement to dodge the vote in 2013 follows another agreement last year that averted a similar vote at Goldman Sachs. The issue of dual leadership roles is becoming increasingly controversial in the investment banking industry, where all the major investment banks – except Bank of America and Citigroup – have combined the roles of chairman and CEO.

CtW and other investors are also pressing for a split in Jamie Dimon’s dual role at JPMorgan and are scheduled to hold a vote on the issue at the annual shareholders’ meeting in May; the SEC rejected an attempt by JPMorgan to avoid the vote.

CtW has argued that splitting the roles improves oversight and accountability of management. ‘In our view, the chairman should be an independent director to promote the robust oversight and accountability of management, and to provide effective deliberation of corporate strategy – something we believe is difficult to accomplish when the most senior executive also serves as the board’s leader,’ CtW wrote in a letter to the SEC late last year.