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Monday, May 6, 2013

Strategic CSR - Goldman Sachs

The article in the url below was published on April 1, so it is hard to know how serious to take it, but it is certainly eye-catching. It deals with Boards of Directors’ compensation levels:
“Take Goldman Sachs, where the average annual compensation for a director – essentially a part-time job – was $488,709 in 2011, the last year for which data is available, up more than 50 percent from 2008, according to Equilar, a compensation data firm. Some of the firm’s 13 directors make more than $500,000 because they have extra responsibilities. And those numbers are likely to skyrocket for 2012 because the firm’s shares rose more than 35 percent last year and its directors are paid in stock.”
Nice work if you can get it! Of course, Goldman Sachs would like us to know that these hard-put upon Directors work hard for their money:
“‘The board’s pay is set at a level that reflects the firm’s long-term performance as well as directors’ substantial time commitment and the increased demands placed on them in recent years by new laws and regulations,’ said David Wells, a Goldman spokesman.”
The firm also argues that, just like for its CEO and senior executives, it needs to pay these rates in order to secure the services of the ‘best’ who, clearly, would just go elsewhere if Goldman Sachs threatened to pay them any less:
“More broadly, banks and compensation experts say, financial firms must now pay a premium to entice and keep qualified directors.”
In other words, due to their past failures, we have to pay them more to make sure that they do not make the same mistakes again:
“After the financial crisis, some financial firms’ boards were criticized for being asleep at the wheel and not understanding the risks being taken. Recruiters say banks are redoubling efforts to recruit directors with more financial expertise who can exercise better oversight.”
The flip side of arguing that Directors face greater scrutiny today as a result of their past failures is that, due to this increased scrutiny, Directors actually have less flexibility than before:
“‘About the only thing bank directors have more of these days is meetings,’ joked one senior Wall Street executive who has frequent interaction with his board but spoke on the condition he not be named because he was not authorized to speak on the record. ‘Regulators have all but stripped boards of the main powers they had before the crisis.’”
Like I said, nice work if you can get it!
Take care
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Pay for Boards At Banks Soars Amid Cutbacks
By Susanne Craig
April 1, 2013
The New York Times
Late Edition – Final