Embattled Wall Street bank Goldman Sachs sought to calm uneasy shareholders on Friday by promising a “rigorous self-examination” of its business practices and principles as directors faced a chorus of criticism over alleged ethical lapses that have tarnished the firm’s reputation.
Under tight security with a significant police presence outside, investors gathered at Goldman’s annual meeting in lower Manhattan to hear chief executive Lloyd Blankfein admit that the firm is going through a “difficult and disappointing” period as it faces a Congressional probe and US$1 billion fraud prosecution by the Securities and Exchange Commission.
“Questions have been raised that go to the heart of this institution’s most fundamental value: How we treat our clients,” said Blankfein, who pledged that a “comprehensive review” of Goldman’s activities would be the top priority for the board, with a new business standards committee to vet adherence to ethical principles.
He spent more than two hours fielding questions largely from a small coterie of community activist organizations and faith-based funds. Veteran civil rights leader Jesse Jackson urged Goldman to address a separation between its prosperity and economic misery elsewhere.
“Wall Street is rising, citizens are sinking,” said Jackson, a former Democratic presidential candidate. “States are sinking, schools are closing, there are record-breaking home foreclosures and student loan defaults.”
Pointing to rising unemployment and increasing poverty, Jackson said Goldman had grown “leaves” of prosperity but that “the roots are dry and getting drier.” He urged Blankfein to find a “pathway” to share the bank’s profits, which reached US$13.4 billion last year, in a broader way.
Blankfein said he agreed: “There is no future for Goldman Sachs unless the economy as a whole grows.”
There were harsher words from a regular attender at US annual meetings, Evelyn Davis, who branded Blankfein as “Lord Goldmine” and suggested that he should resign by tomorrow to retain “what little dignity” he has left. Blankfein replied he had “no current plan” to give up his job, despite calls for his departure from several well-known analysts.
Under questioning, Goldman revealed that it employs 259 lawyers, a rise of 17 on last year. Of its US$184,400 in political donations, about 58 percent went to Democrats and 42 percent to Republicans.
Goldman’s board faced several jibes over the appointment of a former Wal-Mart chief executive, Lee Scott, to its board, and the bank’s controversial remuneration policy came under scrutiny. Employees made an average of US$498,000 each last year as 35 percent of Goldman’s revenue went into a US$16 billion bonus pool.
In one of the rockiest periods of its 141-year history, Goldman has seen its stock drop by 20 percent over the past month as legal woes mount over derivatives deals at the height of the global financial crisis. The bank has been accused by the SEC of misleading clients over a US$1 billion mortgage deal in 2007 that led to a US$840 million loss suffered by Royal Bank of Scotland.
Reports have suggested that Goldman has begun talks with the SEC for a possible out-of-court settlement of the case. However, the firm has been hit with a flurry of civil lawsuits from shareholders and Congress is threatening a crackdown on opaque trading in exotic financial instruments.
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