Gadfly asks Goldman investors to end stock options
(Adds shareholder lawsuit, CEO pay in paragraphs 3-8)
NEW YORK, March 19 (Reuters) - Gadfly shareholder Evelyn Davis, who has railed against excessive executive compensation for decades, wants investors to bar Goldman Sachs Group Inc. (GS.N) from ever again granting stock options to its executives.
Davis' proposal, included in an amended shareholder proxy filed with the Securities and Exchange Commission on Monday, urges Goldman shareholders to approve a proposal "so that no future new stock options are awarded to anyone." It also seeks to bar renewing or re-pricing current stock options, unless called for under an existing contract.
Separately, Goldman was the target of a shareholder lawsuit filed on Friday that contends the bank's top executives were overpaid last year.
The suit, brought by individual stockholder Jeffrey Bader in U.S. District Court in Brooklyn, seeks an injunction blocking Goldman's upcoming annual meeting from going ahead as planned or the voiding of its board of directors' elections if no injunction is granted before the meeting.
The annual meeting is scheduled for March 27 at a Goldman office building in Manhattan.
The lawsuit accuses Goldman's officers and board of undervaluing stock options awarded to Chairman and Chief Executive Lloyd Blankfein and other executives. It says pay information was not properly disclosed in the company's Feb. 21 proxy materials, which the lawsuit contends was a breach of the board's duty to shareholders.
"The purpose of a proxy statement is to inform the stockholders, not to challenge their critical wits," the lawsuit says. "As a result, the proxy statement renders the stockholders unwitting agents of self-inflicted damage." Blankfein last year received more than $54.3 million in cash, stock and options, a record for Wall Street pay, after leading the investment bank for only six months. In 2006, the bank's profits jumped 70 percent to a record $9.4 billion.
"We believe the lawsuit is entirely without merit and we will contest it vigorously," Goldman spokeswoman Andrea Rachman said.
The shareholder proposal put forth by Davis, a frequent critic of corporate America's pay and business practices, targets the company's option awards.
The proposal argues that these grants "have gone out of hand in recent years, and some analysts might inflate earnings estimates because earnings affect stock prices and stock options." There "are other ways to 'reward' executives and other employees, including giving them actual stock instead of options," Davis wrote in the proposal.
Goldman recommended shareholders vote against the proposal, saying it is too restrictive and potentially harmful to the investment bank. Goldman should continue to have the ability to grant stock options to employees and directors as one form of compensation, the bank said.
"The board of directors believes that stock options, as an element of compensation, can align the interests of management with the interests of Goldman Sachs' shareholders," the bank wrote.
Eliminating options, which are used by rivals, also "could place Goldman Sachs at a disadvantage in retaining, motivating and recruiting employees," the bank said.
((Reporting by Joseph Giannone and Martha Graybow, editing by Maureen Bavdek; Reuters messaging: joseph.giannone.reuters.com@reuters.net;+1 646 223 6184)) Keywords: GOLDMAN PROXY/OPTIONS
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