--Goldman tried to get SEC to let it omit proposal on chairman independence
--Chairman independence gaining traction with activist groups
--SEC tells Goldman it didn't agree with arguments
Goldman Sachs Group Inc. (GS) lost its attempt to block a shareholder proposal from its upcoming proxy, clearing the way for a shareholder vote on whether the company's board should have an independent chairman.
In a letter earlier this week and made public Friday, the Securities and Exchange Commission told Goldman that it did not agree with Goldman's arguments for keeping the non-binding proposal off its upcoming proxy, and said it didn't believe Goldman could omit the measure.
Lloyd Blankfein has held both the chairman and chief executive titles at Goldman since 2006, similar to the top executives at rival banks. Of the six biggest U.S. banks, only Bank of America (BAC) and Citigroup Inc. (C) have separate chairmen and chief executives. At Bank of America, Charles Holliday is chairman and Brian Moynihan is chief executive. At Citi, those roles are held by Michael O'Neill and Michael Corbat, respectively.
The proposal is being made by CtW Investment Group, which works with pensions sponsored by a group of unions with 5.5 million members and $200 billion in assets. CtW sent the proposal to Goldman on Dec. 13, calling on the bank's board to adopt an independent chairman who hasn't been an executive officer of Goldman and who is independent of the company's management. The various pensions CtW represents hold 2 million shares of Goldman.
"We still believe that Lloyd Blankfein's dual role as chairman and chief executive officer presents a conflict of interest and undermines accountability," said Patricia Estevez, a senior corporate governance analyst at CtW. The group intends to press ahead with its proposal on Goldman's proxy this year, she said.
Even if shareholders approve the proposal, it is non-binding, meaning it would be up to Goldman to implement the measure. That means Mr. Blankfein wouldn't be forced to give up his dual titles regardless of the outcome of the vote.
Shareholders could withhold support for directors at the next annual meeting if the board defies a majority vote in favor of the proposal, however, Ms. Estevez said.
In January, Goldman asked the SEC whether it could omit the proposal without sanction on the grounds its language was too vague.
Chairman independence has become a hot issue with shareholder activists but has had mixed results at shareholder meetings.
CtW said in a letter to the SEC in January that independent-chairman proposals are approved 30% of the time, citing Institutional Shareholder Services. CtW and other shareholders led by the Service Employees International Union successfully stripped former Bank of America Chief Executive Kenneth Lewis of his chairman's title in 2009.
Morgan Stanley (MS), where James Gorman is both chairman and chief executive, got the SEC's nod in January to exclude a proposal to split those roles from its proxy this year. The SEC sided with Morgan Stanley on the grounds that the shareholder making the proposal didn't provide sufficient evidence he qualified to submit one.
This isn't Goldman's first attempt to keep an independent chairman proposal off its proxy. Last year, Goldman negotiated behind the scenes with the pension plan for the American Federation of State, County and Municipal Employees over an independent chairman proposal.
Afscme's pension, which has $850 million of assets, withdrew its measure after Goldman agreed to appoint a lead outside director. Ms. Estevez of CtW said Friday last year's changes did not go far enough. A spokesman for Goldman wasn't immediately available to comment.
The SEC's decision was sent to Goldman in a letter dated March 5 and appeared on the agency's website on Friday.
Brett Philbin contributed to this report
Write to Liz Moyer at liz.moyer@dowjones.com
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