The Director Compensation Project: Goldman Sachs

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009's Fortune 100 and using information found in their 2009 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting.

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards. Directors are not independent if they received over $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Goldman Sachs (GS-NYSE) 2009 Proxy Statement. According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
John H. Bryan	-	214,360	114,231	10,000	338,591
Claes Dahlback	-	303,539	-	-	303,539
Stephen Friedman	-	307,715	-	-	307,715
William W. George	-	303,539	-	-	303,539
Rajat K. Gupta	-	75,077	228,462	-	303,539
James A. Johnson	-	214,360	114,231	20,000	348,591
Lois D. Juliber	-	303,539	-	20,000	323,539
Edward M. Liddy*	273,718	-	-	-	272,718
Lakshmi N. Mittal**	-	151,809	-	-	151,809
Ruth J. Simmons	-	303,539	-	20,000	323,539

*Mr. Liddy resigned from the board in September. His compensation was prorated to his departure and paid in cash rather than in stock awards.

**Mr. Mittal joined the board in June. His compensation is prorated based on when he joined the board.

Director Compensation. Goldman’s board conducted sixteen meetings in 2008 averaging 95% director attendance. Each director attended at least 75% of the meetings. Non-employee directors receive a $75,000 annual retainer as well as a $25,000 bonus for serving as one of three committee chairs. The retainers are offered as 953 Restricted Stock Units (RSU’s), valued at the closing common stock price on December 17th, which was $78.78 per share. Director compensation for those serving the full year ranged from a low of $303,539 to a high of $348,591. Directors are eligible to participate in a matching charitable gift program where Goldman will match up to $20,000 contributed by directors to their chosen charities.

Director Tenure. Eleven directors serve on Goldman’s board with an average tenure of five years. Three directors share the longest tenure at nine years, with one director having served less than one year. Eight directors serve on other boards with Mr. Gupta’s service the most extensive, serving on AMR Corporation, Genpact LTD, Harman International, and Proctor and Gamble. Other directors serve on various other boards including General Motors, Exxon Mobile, Procter & Gamble, and E.I du Pont de Nemours.

CEO Compensation. Mr. Lloyd Blankfein serves as Chairman and CEO. Mr. Blankfein’s total compensation for 2008 was $1,113,771, approximately half of which was his base salary of $600,000. Significant in Mr. Blankfein’s 2008 compensation is the stark difference between his 2008 pay of just over one million dollars from his 2007 compensation, which was just over $70 million dollars. The reason for this dramatic drop was Goldman’s decision not to offer stock, RSU, or option awards for fiscal 2008 to their key corporate officers. Mr. Gary Cohn, who serves as President and COO experienced a similar change in earnings. In 2008, Mr. Cohn was compensated $3,661,729 with a base salary of $600,000. In 2007, however, Mr. Cohn earned $72,511,357. The reduction in compensation was Goldman’s suspension of bonuses to its top executives.

A car perquisite was part of the compensation for the top five Goldman executives, three of which, the CEO, COO, and CFO received more than $100,000 for commuting and non-business use. COO Jon Winkelreid had the highest car allowance at $124,593. The $69,389 vehicle compensation for Vice Chairman J. Michael Evans included payments to a third-party car service.

Comments

[dougchia]

You claim that your Director Compensation Project is an "ongoing series that examines the way stock exchange independence rules influence director compensation." However, I've read a number of posts from this series and it seems that all you do is repeat information from proxy statements with no analysis. I'm curious to know whether/how you think the stock exchange independence rules influence director compensation. It's not apparent to me that they do, nor do I believe they are intended to. Looking forward to seeing some more analysis here.