Goldman pay vote steals a march on change in the law

Feb 01, 2010
<p>The bank's decision to allow the shareholders to vote on executive compensation while proposing the granting of deferred stock won't be enough to improve bankers' standing with investors</p>

I was not sure whether to be heartened or angered by the news that Goldman Sachs was going to allow its actual owners – the shareholders – to vote on executive compensation. On the one hand, Goldman is finally doing the right thing. On the other, it just stole a march on the change in the law, having doubtless seen the pitchforks and heard the squeak of the tumbrels coming down the street.

One warning sign of a troubled conscience is that Goldman decided to include temporary staff and consultants in its employee totals in order to reduce its per capita compensation figures. Those numbers are somewhat dubious anyhow as receptionists and janitors are lumped in to disguise the cash flow to the top-level plunderers. That’s like a Barbary pirate chief including the galley slaves when explaining to his co-corsairs that his ship’s share of the loot was not that much after all.

It was bad enough that Goldman’s shareholders had no control over the lobbyists spending hundreds of millions of shareholder dollars in Washington to defraud them of their dividends and disenfranchise them from decision making. But then, in December, the executives themselves claimed they didn’t endorse what the lobbyists were doing. That, almost as much as the financial crisis they have engendered between them, shows how undeserving the executives are of their plundered rewards.

During the age of the robber barons, Mr JP Morgan and his colleagues might have made out like bandits, but they did so by financing and building the infrastructure, the railroads, bridges and ports that were the eventual platform for American prosperity. And they made their fortunes from the handsome dividends their stock acquisitions paid.

Their current successors in Wall Street can survey a crumbling infrastructure, a de-industrialized nation with a population mostly poorer both relatively and absolutely than before the current wave of frothy speculation allowed the money monarchs to skim their fortunes off the top.

And what about the shareholders? They are among the most neglected of the stakeholders. Across the financial sector, executive compensation has dwarfed the share of profits disbursed in dividends. Somehow, the excuse of the last few decades that the growth in value of the stocks compensates for dividend shortfalls does not ring true in the last year of plummeting share prices and frozen or suspended dividends.

In its belated effort to jump on the chariot with the angels, Goldman Sachs is proposing to stuff the maws of its management with deferred stock. But this is just another transfer of wealth from stockholders to executives, either causing dilution or prompting share buybacks.

I have a better idea. Executives should be awarded bonuses in frequent flier miles. They are as good a currency as the dollar after the damage the bankers have inflicted on it, and their issue could be a much-needed boost for the struggling airline industry. Executives thus rewarded should be encouraged to fly frequently to faraway places with strange sounding names, and stay away from their desks as much as possible.

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