Goldman Sachs Vs. Angry Nuns

I first thought this was an April Fool's story, but it's not. According to Guardian UK, a group of nuns is pushing Goldman Sachs (NYSE: GS  ) to reconsider its pay practices:

The Sisters of Saint Joseph of Boston, Sisters of Notre Dame de Namur, the Sisters of St Francis of Philadelphia and the Benedictine Sisters of Mt Angel -- all investors in the bank -- have put their name to a proposal to review its remuneration policies, after it emerged its five most senior employees were collectively awarded $69.5m (43m pounds) in pay last year.

The proposal calls for evaluating whether Goldman's compensation is excessive, how laying off low-level workers affects senior executives' pay, and how fluctuations in revenue affects senior executives' pay.

The group is made up of Goldman shareholders, so they're entitled to request this proposal. In fact, kudos to them for exercising their shareholder rights.

But be realistic. These almost certainly are not longtime Goldman investors looking after shareholders' interests. This is quite likely a (perhaps justified) short-term targeted campaign protesting executive pay's effect on society.

If that's the case, here's a question: Why pick on Goldman?

Goldman CEO Lloyd Blankfein made $19 million last year. This is practically par in the CEO world. According to data from Capital IQ, Occidental Petroleum (NYSE: OXY  ) CEO Ray Irani made $76 million last year. Larry Ellison of Oracle (Nasdaq: ORCL  ) made $70 million. Sam Palmisano of IBM (NYSE: IBM  ) , $32 million. Twenty-eight corporate executives made more than $25 million last year -- none of them came from Goldman.

So why the fuss?

I think the problem people have with banker pay isn't that they feel it's unjustified. Frankly, it often is justified, for the same reason Irani's, Ellison's, and Palmisano's pay is justified: Talented bosses can create huge profits that warrant huge paychecks.

It gets touchy with banks because when banks face a crisis, the burden is often paid by everyday folks. You may have never heard of a credit default swap, but you might lose your job because of them. Bankers cause collateral damage. That doesn't happen in many other industries. When WorldCom went bankrupt, its shareholders, debt holders, and employees suffered. That was it. When Lehman Brothers went bankrupt, every inch of the global economy took a hit. The mistakes of bankers cause very real social ramifications in ways other industries can't. That's why so many people -- even nuns -- become outraged at their compensation.

What about you?

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool owns shares of International Business Machines and Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 05, 2011, at 9:58 PM, Kiffit wrote:

    I think the payment of senior corporate people in the US has taken an Alice in Corporate Looking Glass Land quality about it. The Remuneration committees operate like the Mad Hatter's Teaparty. Yes they are market responsive, but so is the court of the Queen of Hearts.

    They are about as market sensitive as French aristocrats before the revolution. "Let the workers eat cake. We can earn 400 times the lowest paid because we can."

    "We live in Caligula Country, where even our horses can be made senators and we feed them gold leaf with their oats to make them gleam in front of the plebs."

    US executive salaries are so decadent they would put a Roman orgy to shame. "Shame? Sorry.....what's that?...Never heard of it. Perhaps you will find it in the surplus stock basement bargains department."

    I can't understand why using their faces on shooting range targets hasn't become a national sport.

    What does it take to show those insensitive and insular clowns that they are walking on terribly thin ice.

  • Report this Comment On April 05, 2011, at 10:43 PM, Nolte808 wrote:

    Why target GS versus other high-paying companies? Because in the eyes of many, Wall street's business model is enriching a handful of well connected insiders at society's (individual investors, pension funds, taxpayers) expense.

  • Report this Comment On April 05, 2011, at 10:58 PM, dcflipflop wrote:

    I think banks are a target (and big banks especially) because a lot of people perceive that when times are great, the bank is making money hand over fist, off the backs of any average Joe that does business with them. Then when times are bad, they need to be bailed out because of their own risky practices. If there is so much of profit sharing with the executives then perhaps there should be loss sharing also.

    I would like to find a comparison of executive pay (vs. average non-exec) for US corporations compared to other mature economies like Germany or Japan. I've been told the multiples there are much easier to swallow than the ridiculous figures that seem to be the norm in the US.

  • Report this Comment On April 06, 2011, at 9:37 AM, Brent2223 wrote:

    Have the nun's forgoten about GS's declaration that they were doing 'god's work' a few years ago?

  • Report this Comment On April 06, 2011, at 6:02 PM, Gator626 wrote:

    I still think there is a certain absurdity for banking execs (who do nothing more than pass money around) receiving such massive compensation packages while those who run firms that build/engineer/innovate receive a fraction of that.

  • Report this Comment On April 09, 2011, at 6:02 PM, bbell46356 wrote:

    Morgan Housel is my Favorite Fool!

  • Report this Comment On April 12, 2011, at 3:33 AM, chaz572 wrote:

    Morgan, I beg to disagree. I don't care how talented Palmisano, Irani, Ellison, and their ilk may be. They are all grossly overpaid. Nobody is worth 1000 times the average household wage in the U.S. If I owned any of those companies, I'd be clamoring for say-on-pay, and voting a resounding NO on approving the pay packages for those CEOs. I'd also be withholding approval for the CEO's seat on the board, and every member of the remuneration committee, like I did last year with Chesapeake and Coeur d'Alene. If enough shareholders did that, pay would come down to reasonable levels soon enough.

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