Goldman diversity double-speak gets investor slap
Wall Street bosses love to talk about their work on diversity. They're not so keen when others do. On Thursday, Goldman Sachs (GS.N) shareholders narrowly rejected a proposal challenging the firm's policy of discouraging staff from taking discrimination or harassment disputes to court.
When publicly confronted on such issues, Goldman and other big banks tend to argue they're already doing enough. Opposing investor proposals sends a different message.
Almost half of shareholders who voted at Goldman's annual meeting on Thursday asked the Wall Street firm's board to create a report on its use of mandatory arbitration, where staff sign contracts saying they'll submit to a private dispute resolution process rather than filing lawsuits.
That approach ensures many complaints stay confidential. A former Goldman attorney published an open letter in November calling for the bank to end the practice. Wells
Fargo (WFC.N) did so last year. It's not that Goldman lacks clear policies against unfair or abusive behavior.
But like its rivals, it prefers to manage the process.
For example, the firm run by
David Solomon on Wednesday argued that the rules of the
Financial Industry Regulatory
Authority, which oversees brokers, require some staff to seek arbitration.
But it's really Goldman, not FINRA, that does the requiring, according to multiple people familiar with the regulations. Likewise, staff are free to file complaints to the U.S. Equal Employment waive any compensation. Opportunity Commission. The one-sided conversation
But that's of limited use if isn't restricted to workplace they can't then file a lawsuit in disputes. Goldman, their own name, or have JPMorgan (JPM.N), Citigroup signed contracts saying they'll (C.N), Bank of America (BAC.N) and Wells Fargo have all faced demands from shareholder activists to conduct external audits into their role in racial inequities.
While none of those proposals has yet received majority support, almost one-third of shareholders at Goldman's meeting supported the move. Such an audit would provide a fuller picture of banks' reputational risks. Goldman can't easily ignore a motion supported by 49% of shareholders, and probably won't.
The bank cut Solomon's pay by $10 million after a much milder protest vote last year. But in any case, when shareholders challenge companies' commitment to diversity or employee welfare, opposition can be counterproductive.
Goldman's near-defeat suggests it's out of touch with its owners. Goldman Sachs said that 49% of shareholders voting at its annual meeting on
April 29 backed a request for a report into its policy of "mandatory arbitration," based on a preliminary tally.
- The policy requires employees who have a workrelated dispute to undergo an arbitration process rather than taking such claims to court.
There are exceptions to the policy - for example, employees can still file a complaint to the U.S. Equal Employment Opportunity Commission. Wells Fargo received a similar proposal in 2019, though it was withdrawn before being put to a vote.
In 2020, the lender scrapped its policy of mandatory arbitration. Separately, around 29% of Goldman shareholders voted in favor of a proposal to prepare an external racial equity audit.
A similar proposal got support from 23% of shareholders at Bank of America's annual meeting and 13% at Wells Fargo's gathering.