The deal between the New
York securities firm and the American Federation of State, County
and Municipal Employees means Goldman will appoint a "lead"
director, but shareholders won't get a chance to vote at the firm's
annual meeting in May on the proposal to replace Mr. Blankfein with
an independent chairman.
The union had claimed
stripping Mr. Blankfein of his chairman powers would help Goldman
repair its reputation and reduce the potential for conflicts of
interest. Goldman shareholders voted down a similar proposal in 2010
by a wide margin.
But with the firm
facing outside pressure over its ethics and business practices,
Goldman executives worried the outcome might be different this time,
according to people familiar with the situation. Some executives
gave the proposal a 50-50 probability of winning.
submitted similar shareholder proposals to split the chairman and
CEO duties at
J.P. Morgan Chase & Co.,
American Express Co.,
Northern Trust Corp. and six other companies. None of those
firms has held talks with Afscme on the proposals, the union said.
Goldman, Afscme's proposal last September sparked months of
discussions and contingency planning among directors and executives
on the firm's powerful management committee. That group includes Mr.
Gary D. Cohn and executives who run all of Goldman's operations.
As part of those
talks, Goldman officials considered making Mr. Cohn the company's
chief executive and reducing Mr. Blankfein's role to chairman if the
union's proposal passed, according to people familiar with the
Such a shift would
have abruptly ended Mr. Blankfein's reign as CEO. The 57-year-old
has been Goldman's chairman and chief executive since 2006. He has
told colleagues that he would rather die at his desk than give up
running the firm.
Still, Mr. Blankfein
indicated that he was willing to step down as CEO if necessary,
these people said. Mr. Cohn is the No. 2 executive at Goldman,
giving him an advantage in the race to succeed Mr. Blankfein. A
Goldman spokesman said Messrs. Blankfein and Cohn weren't available
In a statement Tuesday
night, a Goldman spokesman said the firm's "board of directors and
senior management have not had any discussions or conducted
contingency planning around splitting the roles of Chairman and
executives, including rivals of Mr. Cohn, view his brusque
management style and ties to Mr. Blankfein as a liability for the
firm at a sensitive time. In the wake of the financial crisis,
Goldman has worked hard to dig out from trouble stemming from the
firm's bets against the housing market, its sales of complex
mortgage-backed securities that blew up, and adverse publicity about
high pay levels.
The latest headache
for Messrs. Blankfein and Cohn came earlier this month when a
Goldman employee in London resigned in an op-ed article that accused
the firm of "ripping their clients off." Goldman is investigating
shareholders, especially union-affiliated pension plans, have
prodded companies to separate the posts of chairman and chief
executive, contending that such moves increase the independence of
boards and make CEOs more accountable to directors.
Bank of America Corp. shareholders banned the Charlotte, N.C.,
bank from having the same person as chairman and CEO. Soon after,
Kenneth D. Lewis stepped down as chairman, and he resigned eight
months later as chief executive.
In February, Goldman
negotiated a compromise with the union that allows Mr. Blankfein to
keep both posts and postpones until his resignation or retirement
the final decision on who will lead the company, the union said.
Goldman agreed to appoint at May's annual meeting an independent
"lead" director, bringing the firm in line with guidelines backed by
The change already is
reflected in Goldman's corporate-governance guidelines, which were
amended earlier this month. Goldman and Afscme confirmed the
agreement in response to questions from The Wall Street Journal.
"We appreciated the
constructive talks we had with Afscme," a Goldman spokesman said.
with union officials were led by John F.W. Rogers, the securities
firm's board secretary. Mr. Rogers is known for his
behind-the-scenes maneuvering in New York and Washington.
director of capital strategies for the Afscme Employees Pension
Plan, with more than $850 million in assets, said that "events
subsequent to our withdrawal agreement demonstrate that there are
serious cultural issues at Goldman."
The deal "is a step in
the right direction," she said. "But it remains to be seen if it is
enough." Afscme held 7,101 shares of Goldman as of September.
Also putting pressure
on Goldman: About 15% of outstanding shares are held by index funds,
which often vote in line with the recommendations of proxy advisers.
In addition, new rules no longer allow brokers to vote the shares of
their clients, and brokers had generally backed management.
People familiar with
Goldman's contingency-planning talks said the firm has accelerated
conversations about how to groom and vet its next generation of
Write to Liz Rappaport at