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For Immediate Release

Wednesday, September 14, 2011

AFSCME Plan to Goldman Sachs: Adopt Independent Board Chair

Proposal seeks removal of CEO Lloyd Blankfein as Chairman of Board

Washington, DC — 

The AFSCME Employees Pension Plan (“the AFSCME Plan”) today announced it filed a shareholder proposal asking Goldman Sachs to adopt an independent board chair.

The AFSCME Plan, an institutional shareholder with more than $850 million in assets and a long-time shareholder of Goldman, submitted the shareholder proposal for consideration at Goldman’s 2012 annual spring meeting. The AFSCME Plan views the proposal as an important way to protect and enhance the economic value of its long-term investment in Goldman.

Goldman has come under fire recently, as the 2011 Levin-Coburn Report on the Financial Crisis (“Levin Report”) found that conflicts of interest led Goldman to “place its financial interests ahead of those of its clients,” during the worst financial crisis in decades. The Justice Department is reportedly investigating Chairman and CEO Lloyd Blankfein’s 2010 testimony before the Permanent Senate Subcommittee on Investigations for possible perjury. [i]

Additionally, Goldman settled SEC charges related to its Abacus deal, in which Goldman allegedly deceived clients about the quality of Collateralized Debt Obligations (CDOs) containing the worst of the worst subprime mortgages. Goldman paid a record $550 million fine. In a March 2011 10-K filing, Goldman disclosed possible legal costs of up to $3.4 billion related to its actions during the financial crisis.

The AFSCME Plan believes that the lack of an independent board chair contributed to Goldman’s current problems and that separating the offices of CEO and chair will protect and improve Goldman’s future performance and the value of its shares.

“Main Street should not have to suffer for the financial mistakes made on Wall Street,” said AFSCME Pres. Gerald W. McEntee. “A strong, independent Board chair would focus Goldman on generating long-term value for its shareholders.”

The Levin Report found that under former Chairman and CEO Henry Paulson and Mr. Blankfein’s tenures, Goldman’s traditional investment banking activities became a smaller percentage of business, and Goldman instead became primarily a Wall Street trading house. Under former Chairman and CEO Paulson, Goldman successfully lobbied regulators to release the major investment houses from the net capital rule – the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. [ii] The AFSCME Plan believes that this amassing of risk, which threatened the value of Goldman stock and also contributed to a systemic financial crisis, would have been less likely with an independent board chair to oversee the operations of management.

“Lloyd Blankfein’s Senate testimony has been referred to the Justice Department to determine if he committed perjury. What else is going on at Goldman?” said McEntee. “Goldman shareholders would benefit from independent leadership. A chair is supposed to oversee the CEO. It’s time for Lloyd Blankfein to stop grading his own homework.”

Separation of the chair and CEO positions is a reform increasingly supported by both directors and institutional shareholders as instrumental in protecting the value of publicly held companies. In 2009, the Chairmen’s Forum, a group of more than 50 current and former board chair, directors, chief executives, investors and governance experts hosted by Yale’s Millstein Center, endorsed the voluntary adoption of independent, non-executive chair of the board, finding that “[t]he independent chair curbs conflicts of interest, promotes oversight of risk, manages the relationship between the board and CEO, serves as a conduit for regular communication with shareowners, and is a logical next step in the development of an independent board.” Additionally, the number of U.S. companies moving to separate the chair and CEO positions has been increasing. Forty percent of S&P 500 companies now split the chair and CEO roles.

[i] Elizabeth MacDonald, "DOJ, SEC Asked to Probe Whether Goldman Lied, Defrauded Clients," Fox Business, 5/4/11.
[ii] Stephen Labaton, "Agency’s ’04 Rule Let Banks Pile Up New Debt," New York Times, 10/2/08.

Read the full text of the shareholder proposal.

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