DEF 14A 1 d276093ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

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The Goldman Sachs Group, Inc.

 

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             Proxy Statement for 2012 Annual Meeting of Shareholders   LOGO     
      

 

 

 


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The Goldman Sachs Group, Inc.

Notice of 2012 Annual Meeting of Shareholders

 

 

Time and Date

9:30 a.m., Eastern Time, on Thursday, May 24, 2012

 

Place

30 Hudson Street, 6th Floor, Jersey City, New Jersey 07302

 

Items of Business

  Election to our Board of Directors of the 10 director nominees who are named in the attached Proxy Statement for one-year terms

 

    An advisory vote to approve executive compensation (say on pay)

 

    Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our 2012 fiscal year

 

    Consideration of certain shareholder proposals, if properly presented by the relevant shareholder proponents

 

    Transaction of such other business as may properly come before our 2012 Annual Meeting of Shareholders (Annual Meeting)

 

Record Date

The record date for the determination of the shareholders entitled to vote at our Annual Meeting, or any adjournments or postponements thereof, was the close of business on March 26, 2012

Your vote is important to us. Please exercise your shareholder right to vote.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 24, 2012. Our Proxy Statement, 2011 Annual Report to Shareholders and other materials are available on our website at www.gs.com/proxymaterials.

By Order of the Board of Directors,

 

 

LOGO

Beverly L. O’Toole

Assistant Secretary

April 13, 2012


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Table of Contents

 

 

Introduction and Executive Summary     1   
Corporate Governance     7   

Item 1. Election of Directors

    7   

Board of Directors’ Qualifications and Experience

    7   

Our Director Nominees

    8   

Structure and Role of our Board

    14   

Board Leadership Structure

    14   

Board Oversight

    16   

Commitment of our Board – 2011 Board Meetings

    18   

Process for Selecting Directors

    18   

Board Evaluation

    19   

Independence of Directors

    20   

Our Board Committees

    21   

Audit Committee Financial Expert

    22   

Compensation Committee’s Independent Consultant

    22   
Compensation Matters     23   

Compensation Discussion and Analysis

    23   

Our Compensation Philosophy

    24   

2011 NEO Compensation

    26   

Additional Details on our NEOs’ 2011 Compensation

    29   

Long-Term Performance Incentive Plan

    30   

GS Gives

    32   

Executive Compensation

    33   

2011 Summary Compensation Table

    33   

2011 Grants of Plan-Based Awards

    35   

2011 Outstanding Equity Awards at
Fiscal Year-End

    36   

2011 Option Exercises and Stock Vested

    37   

2011 Pension Benefits

    37   

2011 Non-Qualified Deferred Compensation

    38   

Potential Payments Upon Termination or
Change-in-Control

    39   

Report of our Compensation Committee

    42   

Item 2. An Advisory Vote to
Approve Executive Compensation (Say on Pay)

    43   

Independent Director Compensation

    46   
Audit Matters     48   

Report of our Audit Committee

    48   

Item 3. Ratification of Appointment of
Independent Registered Public Accounting Firm

    49   
Shareholder Proposals     50   

Item 4. Shareholder Proposal Regarding Cumulative Voting

    50   

Item 5. Shareholder Proposal Regarding Executive Compensation and Long-Term Performance

    51   

Item 6. Shareholder Proposal Regarding a Report on Lobbying Expenditures

    53   
Certain Relationships and Related Transactions     55   
Beneficial Ownership     58   
Additional Information     61   
Frequently Asked Questions About our Annual
Meeting
    64   
Annex A: Additional Details on Director Independence     A-1   
Annex B: Goldman Sachs’ Compensation Principles     B-1   
Annex C: Calculation of Adjusted Return on Average Common Shareholders’ Equity     C-1   
 

 

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LOGO

April 13, 2012

Dear Fellow Shareholder:

We are pleased to enclose this year’s Proxy Statement.

Throughout 2011, our firm’s performance was challenged by instability in the Eurozone, depressed client activity and regulatory uncertainty. During this period, we continued to support management’s ongoing commitment to our clients, active engagement with shareholders and regulators and renewed focus on strengthening our communication and transparency with all of our constituents, including the broader public.

Our engagement with shareholders, in particular, has provided a productive opportunity to garner feedback on what we can do better and for our shareholders to learn more about the Board’s priorities. We received valuable input from shareholders following our say on pay vote last year, which reaffirmed our long-held view that pay-for-performance is the most critical aspect of compensation. This philosophy continued to shape the Compensation Committee’s determinations for 2011. We also clarified our disclosure with respect to risk-based clawbacks and expanded our Statement on Policy Engagement and Political Participation, in each case following a constructive dialogue with key constituents.

This year, we strengthened our Board, adding two new directors and refining our leadership structure. Both M. Michele Burns and Debora L. Spar bring to our Board a diverse set of experiences and new perspectives that will greatly benefit us and our firm. We also strengthened our corporate governance by creating the role of Lead Director to oversee our Board’s governance processes.

We are deeply grateful to John H. Bryan and Lois D. Juliber for their service to Goldman Sachs as members of our Board of Directors. During his more than 12 years on our Board, Mr. Bryan served as Presiding and Lead Director and, in that role, consistently provided insightful and independent advice to our Board. Ms. Juliber’s more than eight years of exemplary service included a pivotal role in overseeing the firm’s eight-month Business Standards Committee (BSC) review. Our independent directors have elected James J. Schiro to replace Mr. Bryan as Lead Director and Chair of our Corporate Governance and Nominating Committee. Ms. Burns will replace Mr. Schiro as Chair of our Audit Committee.

With respect to new regulations, we are closely following developments and are supportive of the overarching goal behind many of these changes: improving the safety, soundness and resiliency of the global financial system. We appreciate the importance of deep, liquid capital markets and the role they play in supporting a healthy economy that creates jobs and growth opportunities. Overall, we believe that regulators and the financial industry must continue to work together to make the system safer and stronger while ensuring it remains dynamic enough to foster economic growth.

 


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Finally, our firm has undertaken a number of initiatives to enhance transparency and communicate the role Goldman Sachs plays in the broader economy. We released our inaugural Environmental, Social and Governance Report in 2011, which highlighted our firm’s overall approach, accomplishments and risk management efforts in those significant areas. We improved the readability of our proxy statement, providing an Executive Summary to highlight recent changes and enhancing our description of our corporate governance practices. This improved transparency is a continuation of our efforts in 2010, which included simplifying the language in our Form 10-K and providing enhanced risk management and liquidity disclosures. We continued to evolve our communication with the broader public to explain how we help facilitate economic progress through the work we do with our clients. In conjunction with these efforts, we re-launched our public website, www.goldmansachs.com, to provide additional information and content on our businesses and other firm-related initiatives.

Two years ago, our firm began the BSC review of our business standards and practices, and a committee of our independent directors was actively involved in overseeing this effort. Through that process, as outlined in the BSC’s final report of 39 specific recommendations, we received valuable feedback from a variety of stakeholders. Management has been implementing the recommendations since January 2011, and we have received updates on the progress. We are pleased with the extraordinary work and effort from all levels, divisions and businesses across the firm that has gone into implementing these important recommendations.

As we move forward in 2012, we will continue to explore and pursue sensible practices and new ways to facilitate effective governance and meaningful transparency for all of our stakeholders. In doing so, we remain extremely focused on management’s business priorities and key initiatives to foster long-term, sustainable growth for our shareholders.

We appreciate our ongoing dialogue with you, our shareholders, and look forward to continued engagement.

Lloyd C. Blankfein, Chairman

John H. Bryan

M. Michele Burns

Gary D. Cohn

Claes Dahlbäck

Stephen Friedman

William W. George

James A. Johnson

Lois D. Juliber

Lakshmi N. Mittal

James J. Schiro

Debora L. Spar


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Introduction

 

Our Proxy Statement contains information about the matters that will be voted on at our Annual Meeting as well as other information about our firm and our corporate governance. Below is an Executive Summary that we hope will be helpful to our shareholders and others who read our Proxy Statement.

By April 13, 2012, we will have sent to certain of our shareholders a Notice of Internet Availability of Proxy Materials (Notice), which contains instructions on how to access our Proxy Statement and 2011 Annual Report to Shareholders and how to vote online. Shareholders who do not receive the Notice will continue to receive either a paper or electronic copy of our proxy materials, which will be sent on or about April 16, 2012. For more information, see —Frequently Asked Questions About our Annual Meeting.

Your vote is important to us. Please exercise your shareholder right to vote.

 

Executive Summary

 

 

This summary highlights certain information contained elsewhere in our Proxy Statement—you should read the entire Proxy Statement carefully before voting.

Matters to be Voted on at 2012 Annual Meeting

 

      Board Recommendation      For more
detail, see
page:

Management Proposals

                 

1. Election of Directors

   FOR each director          7   

2. Advisory Vote to Approve Executive Compensation (Say on Pay)

   FOR          43   
3. Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2012    FOR          49   

Shareholder Proposals

                 
4. Cumulative Voting
Requests cumulative voting in the election of directors
   AGAINST          50   

5. Executive Compensation and Long-Term Performance

Requests that certain executives retain 75% of shares for three years post retirement

   AGAINST          51   

6. Report on Lobbying Expenditures

Requests a report disclosing various policies, procedures and expenditures relating to lobbying

   AGAINST          53   

Recent Governance Developments

 

  Ÿ  

M. Michele Burns and Debora L. Spar joined our Board of Directors in 2011.

 

 

  Ÿ  

Our Corporate Governance and Nominating Committee completed its annual review of our board leadership structure.

 

 

  Ÿ  

Our independent directors created a Lead Director role, expanded the duties of this role and designated James J. Schiro as our new Lead Director effective May 2012.

 

 

  Ÿ  

Ms. Burns will be replacing Mr. Schiro as Chair of our Board’s Audit Committee effective May 2012.

 

 

  Ÿ  

We launched our inaugural Environmental, Social and Governance (ESG) Report.

 

 

  Our Board amended our Corporate Governance and Nominating Committee’s charter to provide that the Committee will review ESG issues affecting our firm, including by reviewing our ESG Report.  

 

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  Ÿ  

We enhanced our online Statement on Policy Engagement and Political Participation (see www.gs.com/politicalstatement).

 

 

  Ÿ  

As of the end of the first quarter of 2012, a substantial majority of the 39 recommendations of the Business Standards Committee (BSC) had been fully implemented.

 

Our Firm

 

  Ÿ  

We began as a partnership over 140 years ago; we became a public company in 1999.

 

 

  Collaboration and teamwork remain fundamental to our firm’s culture.  

 

  Ÿ  

We provide a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals.

 

 

  Ÿ  

For 2011, we ranked first in worldwide announced mergers and acquisitions and ranked first in worldwide equity and equity-related offerings, common stock offerings and initial public offerings (as reported by Thomson Reuters).

 

 

  Ÿ  

Since 2008, our total charitable giving, including in support of 10,000 Women, 10,000 Small Businesses and Goldman Sachs Gives (GS Gives), has been in excess of $1.4 billion.

 

 

  Ÿ  

Company snapshot:

 

 

  Market capitalization of approximately $63.4 billion as of the record date  

 

  495,141,507 shares of The Goldman Sachs Group, Inc. common stock (Common Stock) outstanding as of the record date  

 

  33,300 staff members (includes employees, consultants and temporary staff) as of December 31, 2011  

 

  Net revenues of $28.81 billion for the year ended December 31, 2011  

Corporate Governance Highlights

We are committed to active engagement with our shareholders throughout the year. We believe this ongoing engagement process helps us arrive at balanced and appropriate solutions for our diverse shareholder base.

Board Leadership and Structure (see —Corporate Governance—Structure and Role of our Board—beginning on page 14)

Leadership Structure

 

  Ÿ  

Our Corporate Governance and Nominating Committee recently conducted its annual review of our board leadership structure and determined that the combined role of Chairman of our Board and Chief Executive Officer (CEO) is currently the most effective leadership structure for our firm.

 

 

  Ÿ  

This structure provides:

 

 

  a single leader who speaks with one voice;  

 

  clearer accountability; and  

 

  enhanced communication between Board and management.  

 

  Ÿ  

Our independent directors made the following governance enhancements:

 

 

  created a Lead Director role to replace the Presiding Director role and expanded the responsibilities to include, among other things, identifying matters for discussion at executive sessions and leading the annual CEO evaluation; and  

 

  introduced a new $25,000 annual fee for our Lead Director to compensate for the additional time and effort required.

 

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Independence and Diversity

 

  Ÿ  

Eight of 10 director nominees are independent under the New York Stock Exchange (NYSE) rules and under Securities and Exchange Commission (SEC) heightened audit committee standards.

 

 

  Ÿ  

Each of our Board’s standing committees is 100% independent.

 

 

  With all of our independent directors on each committee, they are engaged in all aspects of our Board’s work.

 

  Ÿ  

There are regular executive sessions of independent directors, and any independent director may call an executive session and raise matters for discussion at these executive sessions.

 

 

  Ÿ  

Our Lead Director reviews and approves the agenda, schedule and materials for Board and Corporate Governance and Nominating Committee meetings and executive sessions of independent directors, and is able to add topics to such agenda; independent committee chairs review and approve agenda and materials for all committee meetings.

 

 

  Ÿ  

Annually, our Corporate Governance and Nominating Committee evaluates our Board.

 

 

  Ÿ  

Our Board and each committee may engage independent advisors at their sole discretion.

 

 

  Ÿ  

Two women joined our Board in 2011, and are two of our eight continuing independent directors.

 

 

  Ÿ  

Our Board considers a range of types of diversity with respect to our Board, including race, gender, ethnicity, culture, nationality and geography, and our Board reflects diverse viewpoints, backgrounds, skills, experiences and expertise.

 

Commitment of our Board

 

  Ÿ  

Our current director attendance for Board and committee meetings averaged 96% in 2011.

 

 

  Ÿ  

Our share ownership policy for directors requires that each own a minimum of 5,000 shares or restricted stock units (RSUs) within two years.

 

 

  Ÿ  

All RSUs granted to a director must be held for the director’s entire tenure on our Board, with shares of Common Stock only delivering in the year following the director’s retirement.

 

 

  Ÿ  

The average tenure of our director nominees is approximately six years.

 

Board and Committee Summary

 

      Director Nominees      Percentage of Independent
Directors
    2011 Meetings  

Board

     10         80%        15   

Audit Committee

     8         100%        13   

Compensation Committee

     8         100%        8   

Corporate Governance and Nominating Committee

     8         100%        6   

Risk Committee

     8         100%        6   

Executive Sessions of Independent Directors

                    13

 

  * Includes six executive sessions of our independent directors chaired by our current Lead Director and seven additional sessions during which our independent directors met without management present during meetings of our Audit, Risk and/or Compensation Committees.  

 

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Shareholder Rights

 

  Ÿ  

We have a single class share structure.

 

  Ÿ  

We do not have a “poison pill.”

 

 

  Ÿ  

Our by-laws and charter can be amended by majority vote.

 

 

  Ÿ  

We have annual elections of directors (i.e., no staggered board), with majority voting in uncontested elections.

 

 

  Ÿ  

Shareholders holding at least 25% of our outstanding shares of Common Stock can call a special meeting.

 

Risk Management

 

  Ÿ  

We maintain comprehensive processes for evaluating and managing risks.

 

 

  Ÿ  

Our independent Risk Committee regularly reviews our aggregate risk exposures with management, including our Chief Financial Officer (CFO) and Chief Risk Officer (CRO).

 

 

  Ÿ  

Risk is assessed from the standpoint of long-term ownership, and our senior people are long-term shareholders.

 

Executive Compensation

 

  Ÿ  

Our Compensation Committee continued our pay-for-performance philosophy in 2011.

 

 

  Ÿ  

No executive officer has an employment agreement that provides for severance or “golden parachute” payments.

 

 

  Ÿ  

Equity-based awards have forfeiture and recapture provisions.

 

 

  Ÿ  

Transfer restrictions apply to 50% of the gross shares underlying equity-based awards for five years after grant.

 

 

  Ÿ  

Our senior executive officers must retain 75% of the after-tax shares received as compensation.

 

 

  Ÿ  

Upon retirement, there is no acceleration of delivery of equity-based awards, and transfer restrictions continue.

 

 

  Ÿ  

Our Compensation Committee considers the safety and soundness of our firm in connection with executive compensation determinations.

 

 

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Named Executive Officer Compensation (see—Compensation Matters —beginning on page 23)

 

  Ÿ  

Our 2011 Named Executive Officers (NEOs) are Lloyd C. Blankfein, Gary D. Cohn, David A. Viniar, J. Michael Evans and John S. Weinberg.

 

 

  Ÿ  

Below are certain highlights of NEO compensation. It is important that you review the Compensation Discussion and Analysis and the compensation-related tables for a complete understanding of our NEOs’ compensation.

 

2011 Annual Compensation

 

Ÿ    Our net revenues for 2011 were down 26% compared to last year and, consistent with our pay-for-performance philosophy, 2011 annual compensation (salary and annual variable compensation) for each NEO approved by our Compensation Committee was down approximately 35%, while 2011 annual variable compensation for each NEO was down approximately 44%, in each case compared to 2010. The illustration to the right shows this decline in CEO annual compensation.

   LOGO

Ÿ   Equity-based awards continue to constitute a significant portion of the annual variable compensation awarded to our NEOs. For 2011, our Compensation Committee awarded to each NEO variable compensation of $7 million in RSUs and $3 million in cash. The illustration to the right shows this percentage.

 

Ÿ   The terms of the 2011 RSUs are the same as the terms of 2010 RSUs, including forfeiture and recapture provisions, delivery over three years and five-year transfer restrictions from the date of grant (through January 2017) that will apply to substantially all of the shares of Common Stock underlying the RSUs (Shares at Risk) delivered to our NEOs.

  

 

LOGO

 

Ÿ   As illustrated below, over time we have outperformed our core competitors (Bank of America Corporation, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley). From fiscal 2004 through fiscal 2007, our average return on average common shareholders’ equity (ROE) exceeded the average ROE* of our core competitors by approximately 12.8 percentage points. Despite a difficult operating environment since the financial crisis, from fiscal 2008 through fiscal 2011 (including a one-month period in December 2008 for us and Morgan Stanley when our fiscal year-ends changed), our average ROE still exceeded the average ROE of our core competitors by approximately 9.1 percentage points.

 

* ROE is as disclosed in company filings or, if ROE is not disclosed, is computed by dividing net earnings available to common shareholders by average common shareholders’ equity as disclosed in company filings.

 

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  Ÿ  

From fiscal 2008 through fiscal 2011, the average annual compensation awarded to our CEO was approximately 80% less than the average annual compensation awarded to our CEO from fiscal 2004 through fiscal 2007.

 

 

  CEO annual compensation for each year is salary and annual variable compensation (RSUs, options and/or cash, as applicable) approved by our Compensation Committee for that year.  

 

 

LOGO

Long-Term Performance Incentive Plan (LTIP)

 

  Ÿ  

In February 2012, our Compensation Committee granted to each NEO a long-term incentive compensation award under our LTIP with an initial notional value of $3 million. The terms of these awards, including the performance metrics and thresholds, the forfeiture and recapture provisions and the minimum performance period of three years, are the same as the terms of the LTIP awards granted in January 2011, other than the initial notional value.

 

 

  Ÿ  

These awards are not considered part of annual compensation because no amounts are earned until the end of the performance period (January 2015 or, if extended, no later than January 2020). LTIP awards are not included in the charts above.

 

 

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Corporate Governance

 

Item 1. Election of Directors

Our Board currently consists of 12 directors, 10 of whom are independent.

Pursuant to the policies and procedures set forth in our Corporate Governance Guidelines, John H. Bryan, having reached the Board retirement age of 75, will not stand for re-election at our Annual Meeting. Lois D. Juliber also will not stand for re-election at our Annual Meeting as a result of increasing time commitments associated with her other activities. Our Board expresses sincere gratitude to Mr. Bryan and Ms. Juliber for their service for more than 12 years and more than eight years, respectively. Both Mr. Bryan, who served as our Presiding and Lead Director, and Ms. Juliber, who participated in the Board’s committee overseeing the work of the BSC, were tireless in their efforts and consistently provided valuable, independent advice and insights. Their focus on our culture of teamwork, excellence and client service not only benefitted our shareholders, it strengthened the environment in which our more than 30,000 people around the world work each day on behalf of our clients. Our independent directors have determined that Mr. Schiro will replace Mr. Bryan as our Lead Director. Mr. Schiro also will serve as Chair of our Corporate Governance and Nominating Committee, with Ms. Burns replacing Mr. Schiro as Chair of our Audit Committee.

Our directors are familiar with our business and the risks and competition we face, which allows them to participate actively and effectively in Board and committee deliberations. Our directors meet and speak frequently with each other and with members of our senior management team. These formal meetings and informal discussions occur based on the needs of our business and the market environment.

Board of Directors’ Qualifications and Experience

There are certain qualifications and experience that all of our director nominees possess:

 

  Ÿ  

Integrity, business judgment and commitment;

 

  Ÿ  

Leadership and expertise in their respective fields;

 

  Ÿ  

Demonstrated management ability;

 

  Ÿ  

Financial literacy;

 

  Ÿ  

Active involvement in educational, charitable and community organizations; and

 

  Ÿ  

Extensive experience in the public, private or non-profit sectors, gained through their current and past senior executive positions and their service on the boards of directors and board committees of other public or private companies, non-profit entities and on our Board.

Our director nominees have a great diversity of experiences and bring to our Board a wide variety of skills, qualifications and viewpoints that strengthen their ability to carry out their oversight role on behalf of our shareholders. They have developed skills and gained experience across a broad range of industries, including financial services, consumer products, retail, industrial resources, manufacturing and academia, in both established and growth markets, and in the public, private and non-profit sectors. In the biographies of our director nominees below, we describe certain of the many areas of individual expertise that each director nominee brings to our Board, including:

 

Directors’ Qualifications and Experience
Financial services    Risk management      Accounting
Corporate governance    Investment management      Credit evaluation
International experience    Business ethics      Government and public policy
Management    Leadership      Human capital management
Marketing    Operations      Technology
Academia    Philanthropy     

 

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Our Director Nominees

 

In light of the individual qualifications and experiences of each of our director nominees and his or her contributions to our Board, our Board has concluded that each of our director nominees should be re-elected to our Board.

Our Board unanimously recommends that shareholders vote FOR all of our director nominees.

 

Name   Age   Independent   Director Since   Primary Occupation   Other
Current
Public
Company
Boards
  Standing Committee
Membership

Lloyd C. Blankfein

  57   No   April 2003   Our Chairman and CEO   0   None

M. Michele Burns

  53   Yes   October 2011   Executive Director and CEO, Retirement Policy Center sponsored by Marsh & McLennan Companies, Inc.   2   All*

Gary D. Cohn

  51   No   June 2006   Our President and Chief Operating Officer   0   None

Claes Dahlbäck

  64   Yes   June 2003   Senior Advisor, Investor AB and Foundation Asset Management   0   All

Stephen Friedman

  74   Yes   April 2005   Chairman, Stone Point Capital LLC   0  

All

Chair, Risk Committee

William W. George

  69   Yes   December 2002   Professor of Management Practice, Harvard Business School   1   All

James A. Johnson

  68   Yes   May 1999   Vice Chairman, Perseus LLC   2  

All

Chair, Compensation Committee

Lakshmi N. Mittal

  61   Yes   June 2008   Chairman and CEO, ArcelorMittal S.A.   2   All

James J. Schiro

  66   Yes   May 2009   Retired, Chairman and Chief Executive Officer, Zurich Financial Services   3  

All

Chair, Audit Committee*

Debora L. Spar

  48   Yes   June 2011   President, Barnard College   0   All

 

 

* As of May 2012, Mr. Schiro will be Lead Director and Chair of our Corporate Governance and Nominating Committee, and Ms. Burns will be Chair of our Audit Committee.

If elected by our shareholders, the 10 director nominees will serve for a one-year term expiring at our 2013 Annual Meeting of Shareholders. Each director will hold office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal.

All of our director nominees are currently members of our Board. Each has been recommended for election by our Corporate Governance and Nominating Committee and approved and nominated for election by our Board.

Our Board, upon the recommendation of our Corporate Governance and Nominating Committee, appointed each of Dr. Spar (in June 2011) and Ms. Burns (in October 2011) as a director to hold office for a term expiring at our Annual Meeting. Dr. Spar and Ms. Burns were each appointed to all of our standing committees.

Dr. Spar and Ms. Burns were both recommended to our Corporate Governance and Nominating Committee by a director search firm retained by the Committee.

All of our directors are elected by majority vote. An incumbent director who fails to receive a majority of FOR votes will be required to tender his or her resignation to our Board. Our Corporate Governance and Nominating Committee will then assess whether there is a significant reason for the director to remain on our Board and will make a recommendation regarding the resignation to our Board.

For detailed information on the vote required for the election of directors and the choices available for casting your vote, please see —Frequently Asked Questions About our Annual Meeting.

There are no family relationships between any of our directors or executive officers.

Each of our director nominees who was elected at our 2011 Annual Meeting of Shareholders received over 94% of votes cast in favor.

 

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Below is biographical information about our director nominees. This information is current as of February 1, 2012 and has been confirmed by each of our director nominees for inclusion in our Proxy Statement.

 

 

LOGO    

Lloyd C. Blankfein, 57

Chairman and Chief Executive Officer

Director Since: April 2003

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Goldman Sachs

 

  Chairman and Chief Executive Officer (June 2006 – Present)

 

  President and Chief Operating Officer (January 2004 – June 2006)

 

  Vice Chairman with management responsibility for Fixed Income, Currency and Commodities (FICC) and Equities Divisions (April 2002 – January 2004)

 

  Co-head of FICC (1997 – April 2002)

 

  Head and/or Co-head of the Currency and Commodities Division (1994 – 1997)

Other Professional Experience and Community Involvement

 

Ÿ  

Member, Dean’s Advisory Board, Harvard Law School

 

Ÿ  

Member, Dean’s Council, Harvard University

 

Ÿ  

Member, Advisory Board, Tsinghua University School of Economics and Management

 

Ÿ  

Member, Board of Overseers, Weill Medical College Cornell University

 

Ÿ  

Member, Board of Directors, Partnership for New York City

Experience and Qualifications

With over 25 years of experience in various positions at Goldman Sachs in New York and London, Mr. Blankfein has extensive knowledge of all aspects of our business, including our risk management practices and our day-to-day operations. Mr. Blankfein uses this firm-specific knowledge and experience in his role as Chairman to guide our Board in its strategic and risk management oversight roles and to keep our Board apprised of significant developments in our business.

 

 

LOGO    

M. Michele Burns, 53

Director Since: October 2011

Committees: Member, all standing committees

Other Current Public Company Directorships: Cisco Systems, Inc., Wal-Mart Stores, Inc.

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Executive Director and CEO, Retirement Policy Center, sponsored by Marsh & McLennan Companies, Inc., Ms. Burns is currently responsible for the planning and design of the recently established Retirement Policy Center, which focuses on retirement public policy issues (October 2011 – present)

 

Ÿ  

Chairman and Chief Executive Officer, Mercer LLC, a subsidiary of Marsh & McLennan Companies, Inc. and a global leader in human resource consulting, outsourcing and investment services (September 2006 – early October 2011)

 

Ÿ  

Chief Financial Officer, Marsh & McLennan Companies, Inc., a global professional services and consulting firm (March 2006 – September 2006)

 

Ÿ  

Chief Financial Officer, Chief Restructuring Officer and Executive Vice President, Mirant Corporation, a competitive energy company (May 2004 – January 2006)

 

Ÿ  

Executive Vice President and Chief Financial Officer, Delta Air Lines, Inc., an air carrier, which filed for protection under Chapter 11 of the United States Bankruptcy Code in September 2005 (including various other positions, 1999 – April 2004)

 

Ÿ  

Senior Partner and Leader, Southern Regional Tax Practice, Arthur Andersen LLP, an accounting firm (including various other positions, 1981 – 1999)

Other Professional Experience and Community Involvement

 

Ÿ  

Board member and Treasurer, Elton John AIDS Foundation

Experience and Qualifications

As the former Chief Financial Officer of several global public companies, Ms. Burns brings to the board substantial expertise in accounting and the review and preparation of financial statements, which she will draw upon as our new Audit Committee Chair. In addition, as the former Chief Executive Officer of Mercer LLC, Ms. Burns brings to our Board her experience in human capital management and strategic consulting, which assists our Board in its oversight of our firm’s strategy. Through her service on the boards of directors and board committees of other public companies and not-for-profit entities, Ms. Burns has developed additional leadership and corporate governance expertise.

 

 

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LOGO    

Gary D. Cohn, 51

President and Chief Operating Officer

Director Since: June 2006

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Goldman Sachs

 

  President and Chief Operating Officer (or Co-Chief Operating Officer) (June 2006 – Present)

 

  Co-head of global Securities businesses (December 2003 – June 2006)

 

  Co-head of FICC (September 2002 – December 2003)

 

  Co-Chief Operating Officer of FICC, Head of Commodities and other FICC businesses (variously, 1999 – 2002)

 

  Head of Commodities (1996 – 1999)

Other Professional Experience and Community Involvement

 

Ÿ  

Trustee, NYU Hospital

 

Ÿ  

Trustee, NYU School of Medicine

 

Ÿ  

Chairman, Advisory Board, NYU Hospital for Joint Diseases

 

Ÿ  

Trustee, Harlem Children’s Zone

 

Ÿ  

Trustee, American University

Experience and Qualifications

Over the course of his more than 20-year career at Goldman Sachs in New York and London, and in his current role as President and Chief Operating Officer, Mr. Cohn has developed broad experience across our firm and brings to our Board substantial insight into the firm’s various business lines and day-to-day operations. Mr. Cohn has particular expertise in commodities and related markets, having previously served as a director of the London Metals Exchange and as a member of the Board of Directors and the Executive Committee of the New York Mercantile Exchange and the Commodity Exchange.

 

 

LOGO    

Claes Dahlbäck, 64

Director Since: June 2003

Committees: Member, all standing committees

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Investor AB, a Sweden-based investment company

 

  Senior Advisor (April 2005 – Present)

 

  Chairman (April 2002 – April 2005)

 

  Vice-Chairman (April 1999 – April 2002)

 

  President and Chief Executive Officer (1978 – 1999)

 

Ÿ  

Senior Advisor, Foundation Asset Management, which is owned by three Wallenberg Foundations and acts as advisor to the Foundations with respect to their holdings (November 2007 – present)

Other Professional Experience and Community Involvement

 

Ÿ  

Member, Royal Swedish Academy of Engineering Sciences and Royal Swedish Society of Naval Sciences

 

Ÿ  

Honorary Doctor and Director, Stockholm School of Economics; Chair, Stockholm School of Economics Foundation

 

Ÿ  

Chair, Leader of the Year Award

 

Ÿ  

Commander, Order of the White Rose of Finland

 

Ÿ  

Recipient, Swedish Kings Medal of the Twelfth Night with the Seraphim Ribbon

Experience and Qualifications

During his more than 30 years at Investor AB, Mr. Dahlbäck developed extensive experience in investment banking (through his involvement in Investor AB’s numerous mergers and acquisitions) and in investment management. Mr. Dahlbäck’s critical insight in these areas, along with his substantial experience in international business, assists the Board in its oversight of the firm’s global investment banking and asset management businesses. Through his service on the boards of directors and board committees of companies and not-for-profit entities, Mr. Dahlbäck has also developed expertise in corporate governance.

 

 

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LOGO    

Stephen Friedman, 74

Director Since: April 2005

Committees: Chair, Risk Committee; member of all other standing committees

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Chairman, Stone Point Capital LLC, a private equity firm (June 2005 – Present)

 

Ÿ  

Chairman, President’s Intelligence Advisory Board and Chairman, Intelligence Oversight Board, each of which provided independent advice to the President of the United States on matters relating to U.S. intelligence efforts (2006 – 2008)

 

Ÿ  

Chairman, Federal Reserve Bank of New York (January 2008 – May 2009)

 

Ÿ  

Assistant to the President for Economic Policy; Director of the National Economic Council (2002 – 2004)

 

Ÿ  

Senior Partner and Chairman of the Management Committee, Goldman Sachs (retired in 1994, having joined the firm in 1966)

Other Professional Experience and Community Involvement

 

Ÿ  

Board member, Council on Foreign Relations

 

Ÿ  

Board member, Memorial Sloan-Kettering Cancer Center

 

Ÿ  

Trustee, The Aspen Institute

Experience and Qualifications

As Chairman of the private equity firm Stone Point Capital LLC, Mr. Friedman brings substantial experience in the financial services and investment management industries to our Board. Mr. Friedman’s experience includes a lengthy career at Goldman Sachs, where he developed a deep knowledge of our firm and businesses. Having served in various public sector roles, Mr. Friedman offers a seasoned perspective on government, regulation and risk management, which he draws upon in his role as Chair of our Risk Committee.

 

 

LOGO    

William W. George, 69

Director Since: December 2002

Committees: Member, all standing committees

Other Current Public Company Directorships: Exxon Mobil Corporation

Other Public Company Directorships within past 5 years: Novartis AG

 

 

Career Highlights

Ÿ  

Professor of Management Practice, Harvard Business School (January 2004 – Present)

 

Ÿ  

Medtronic, Inc., a medical technology company

 

  Chairman (April 1996 – April 2002)

 

  Chief Executive Officer (May 1991 – May 2001)

 

  President and Chief Operating Officer (1989 – 1991)

 

Ÿ  

Executive Vice President, Honeywell International Inc., a diversified technology and manufacturing company (1978 – 1989)

 

Ÿ  

President, Litton Microwave Cooking; Vice President, Litton Industries, a diversified manufacturing company (1969 – 1978)

Other Professional Experience and Community Involvement

 

Ÿ  

Former Professor of Leadership and Governance, International Institute for Management Development

 

Ÿ  

Former Visiting Professor of Technology Management, École Polytechnique Fédérale de Lausanne

 

Ÿ  

Former Executive-in-Residence, Yale School of Management

 

Ÿ  

Board member, World Economic Forum USA

 

Ÿ  

Board member, Guthrie Theater

 

Ÿ  

Trustee, Carnegie Endowment for International Peace

Experience and Qualifications

A professor of management practice at Harvard Business School and author of books on leadership, Mr. George brings academic expertise in business management and corporate governance to our Board, along with significant practical experience in management, technology and governance developed during his career as Chief Executive Officer and Chairman of Medtronic, Inc. and as a senior executive at Honeywell International Inc. and Litton Industries. Mr. George’s service on the boards of directors and board committees of several other public companies and not-for-profit entities has given him additional perspective on management and corporate governance.

 

 

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LOGO    

James A. Johnson, 68

Director Since: May 1999

Committees: Chair, Compensation Committee; member of all other standing committees

Other Current Public Company Directorships: Forestar Group Inc. and Target Corporation

Other Public Company Directorships within past 5 years: KB Home, Temple Inland Inc. and UnitedHealth Group Inc.

 

 

Career Highlights

Ÿ  

Vice Chairman, Perseus LLC, merchant banking and private equity firm (April 2001 – Present)

 

Ÿ  

Johnson Capital Partners, a private investment company

 

  Chairman and Chief Executive Officer (January 2000 – March 2001)

 

  Consultant (March 2001 – Present)

 

Ÿ  

Fannie Mae

 

  Chairman of the Executive Committee (1999)

 

  Chairman and Chief Executive Officer (February 1991 – 1998)

 

  Vice Chairman (1990 – February 1991)

Other Professional Experience and Community Involvement

 

Ÿ  

Chairman Emeritus, John F. Kennedy Center for the Performing Arts

 

Ÿ  

Member, Council on Foreign Relations

 

Ÿ  

Member, American Academy of Arts and Sciences

 

Ÿ  

Member, American Friends of Bilderberg

 

Ÿ  

Honorary Trustee, The Brookings Institution

Experience and Qualifications

As Vice Chairman of Perseus LLC and through other professional experience in financial services, Mr. Johnson brings extensive knowledge of the financial services and investment management industries to our Board. In addition, Mr. Johnson offers deep insight into governmental affairs and the regulatory process, gained from, among other things, his tenure at Fannie Mae and his work with Vice President Walter F. Mondale, including as the Vice President’s Executive Assistant. Through his service on the boards of directors of numerous other public companies (including as chair of several compensation committees) and not-for-profit entities, Mr. Johnson has also developed expertise in corporate governance, and executive compensation in particular, which he brings to his role as Chair of our Compensation Committee.

 

 

LOGO    

Lakshmi N. Mittal, 61

Director Since: June 2008

Committees: Member, all standing committees

Other Current Public Company Directorships: ArcelorMittal S.A and European Aeronautic Defence and Space Company EADS N.V.

Other Public Company Directorships within past 5 years: ICICI Bank Limited

 

 

Career Highlights

Ÿ  

ArcelorMittal S.A., a steel company

 

  Chairman and Chief Executive Officer (May 2008 – Present)

 

  President and Chief Executive Officer (November 2006 – May 2008)

 

Ÿ  

Chief Executive Officer, Mittal Steel Company N.V. (formerly the LNM Group) (1976 – November 2006)

Other Professional Experience and Community Involvement

 

Ÿ  

Member, International Business Council of the World Economic Forum

 

Ÿ  

Advisory Board, Kellogg School of Management, Northwestern University

 

Ÿ  

Board of Trustees, Cleveland Clinic

 

Ÿ  

Member, Executive Committee, World Steel Association

 

Ÿ  

Executive Board, Indian School of Business

Experience and Qualifications

As the founder of Mittal Steel Company and now Chairman and Chief Executive Officer of ArcelorMittal S.A., the largest steelmaker in the world, Mr. Mittal brings significant experience in business development and operations to our Board, along with substantial expertise in international business and growth markets. Mr. Mittal’s service on the boards of directors and board committees of other international public companies and not-for-profit entities also provides him with knowledge of corporate governance, and international governance in particular.

 

 

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LOGO    

James J. Schiro, 66

Director Since: May 2009

Committees: Chair, Audit Committee; member of all other standing committees

Other Current Public Company Directorships: PepsiCo, Inc., REVA Medical, Inc. and Royal Philips Electronics

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Zurich Financial Services, an insurance based finance group

 

  Chairman of the Group Management Board and Chief Executive Officer (May 2002 – December 2009)

 

  Chief Operating Officer – Finance (March 2002 – May 2002)

 

Ÿ  

Chief Executive Officer, PricewaterhouseCoopers LLP, a provider of assurance, tax and business consulting services (1998 – 2002)

 

Ÿ  

Chairman and Chief Executive Officer, Price Waterhouse LLP, an accounting firm (1995 – 1998)

Other Professional Experience and Community Involvement

 

Ÿ  

Trustee, St. John’s University

 

Ÿ  

Trustee, Institute for Advanced Study

 

Ÿ  

Vice-Chairman, American Friends of the Lucerne Festival

 

Ÿ  

Former Member, Advisory Board, Tsinghua University School of Economics and Management

Experience and Qualifications

Mr. Schiro has experience in international business, and in particular, global capital markets, developed during his tenure at the helm of Zurich Financial Services, one of the world’s largest insurance groups. As Chief Executive Officer and Chief Operating Officer – Finance at Zurich Financial Services, Mr. Schiro developed both managerial capabilities as well as experience in the review and preparation of financial statements. He also brings solid financial and banking acumen gained from his role as Chief Executive Officer and other positions held at PricewaterhouseCoopers LLP. Through his service on the boards of directors and board committees of other public companies and not-for-profit entities, Mr. Schiro has also developed corporate governance expertise, which he will draw upon in his new roles as our Lead Director and Corporate Governance and Nominating Committee Chair.

 

 

LOGO    

Debora L. Spar, 48

Director Since: June 2011

Committees: Member, all standing committees

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

President, Barnard College (July 2008 – Present)

 

Ÿ  

Harvard Business School

 

  Spangler Family Professor of Business Administration (2005 – 2008)

 

  Senior Associate Dean; Director, Division of Research and Faculty Development (2005 – 2007)

 

  Senior Associate Dean, Recruiting (2004 – 2005)

 

  Professor of Business, Government and Competition; Chair, Business, Government and the International Economy Unit (1999 – 2004)

 

  Associate Professor of Business, Government and Competition (1995 – 1999)

 

  Assistant Professor of Business, Government and Competition (1991 – 1995)

Other Professional Experience and Community Involvement

 

Ÿ  

Member, Council on Foreign Relations

 

Ÿ  

Member, Board of Trustees, The Nightingale-Bamford School

 

Ÿ  

Member, American Academy of Arts & Sciences

Experience and Qualifications

As the President of Barnard College and an author of numerous books, as well as by virtue of her previous experience as a professor at Harvard Business School, Dr. Spar brings to our Board an academic perspective on government and public policy, and in particular, the international political economy and growth markets. Through her service on the boards of directors of not-for-profit entities, Dr. Spar has developed additional leadership and corporate governance expertise.

 

 

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Structure and Role of our Board

Board Leadership Structure

Our Board does not have a policy as to whether the roles of Chairman and CEO should be separate or combined. Rather, our Board, through our Corporate Governance and Nominating Committee, annually assesses these roles and deliberates the merits of its leadership structure to ensure that the most efficient and appropriate structure is in place. In addition, our Board has determined that if the Chairman is not an independent director, then there should also be an independent Lead Director appointed by our independent directors. The Lead Director also serves as the Chair of our Corporate Governance and Nominating Committee.

 

Our Current Leadership Structure

As a result of its most recent board leadership review in late 2011 and early 2012, our Corporate Governance and Nominating Committee determined that combining the roles of Chairman and CEO is currently the most effective leadership structure for our firm. Among other reasons:

 

  Ÿ  

A combined Chairman and CEO structure provides our firm with a single leader who speaks with one voice to our shareholders, clients, employees, regulators, other stakeholders and the public.

 

 

  Demonstrates clearer accountability to our shareholders, clients and other stakeholders.  

 

  Enhances transparency between management and our Board through efficient and effective communication with the Board on significant business developments and time-sensitive matters.  

 

  Ÿ  

Mr. Blankfein has extensive knowledge of all aspects of our business, operations and risks, which affords him the insight necessary to effectively guide discussions at Board meetings.

 

 

  He has provided leadership and guidance to our firm, particularly in light of the continued economic challenges and broader regulatory changes affecting our industry.  

 

  He has served as a knowledgeable resource for our independent directors.  

 

  Ÿ  

The combined role is both counterbalanced and enhanced by the independence of our Board, the independent leadership provided by our Lead Director and independent committee chairs and the governance policies and practices in place at our firm.

 

 

  Our Chairman and CEO and our Lead Director meet and speak with each other regularly about our Board and our firm.  

 

  As our new Lead Director, Mr. Schiro will draw upon his deep experience both as an executive and as a director, as well as his financial and banking acumen, and will provide strong, independent leadership at the Board level.  

 

 

The key responsibilities of our Chairman and CEO and our Lead Director include:

 

Chairman and CEO

 

  Ÿ  

Chairs Board meetings.

 

  Ÿ  

Chairs annual shareholder meeting.

 

  Ÿ  

Sets agenda for Board meetings (in consultation with, and subject to the approval of, our Lead Director) and reviews schedule for Board meetings.

 

  Ÿ  

Guides discussions at Board meetings and encourages directors to voice their views.

 

  Ÿ  

Serves as a resource for our Board.

 

  Ÿ  

Communicates significant business developments and time-sensitive matters.

Lead Director

 

  Ÿ  

Presides at executive sessions of independent directors; presides at each Board meeting at which the Chairman and CEO is not present.

 

  Ÿ  

Engages with our other directors to identify discussion topics for executive sessions.

 

  Ÿ  

Advises our Chairman and CEO of any developments (such as decisions made or suggestions raised) at the executive sessions, as appropriate.

 

  Ÿ  

Facilitates communication between the independent directors and our Chairman and CEO.

 

 

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Chairman and CEO (continued)

 

  Ÿ  

Establishes the “tone-at-the-top” in coordination with the Board, and embodies these values for our firm.

 

  Ÿ  

Serves as a public face of our Board and our firm.

 

  Ÿ  

Responsible for managing the day-to-day business and affairs of our firm.

 

  Ÿ  

Leads the implementation of corporate policy and strategy.

 

  Ÿ  

Interacts daily with our President and Chief Operating Officer (COO), CFO and other senior leadership of our firm.

 

  Ÿ  

Manages senior leadership of our firm.

 

  Ÿ  

Meets frequently with clients and investors, providing an opportunity to understand and respond to concerns and feedback; communicates feedback to our Board.

Lead Director (continued)

 

  Ÿ  

Engages with our Chairman and CEO between Board meetings to assist with informing or engaging independent directors.

 

  Ÿ  

Reviews and approves agenda, schedule and materials for Board and Corporate Governance and Nominating Committee meetings and executive sessions, and is able to add topics to such agenda.

 

  Ÿ  

Reviews agenda and schedule for other committee meetings.

 

  Ÿ  

Calls meetings of the independent directors.

 

  Ÿ  

Oversees our Board’s governance processes, including Board evaluations, and leads the annual CEO evaluation.

 

  Ÿ  

Meets directly with management and non-management employees of our firm.

 

  Ÿ  

Available for consultation and direct communication with shareholders, as appropriate.

 

 

Annual Assessment of Leadership Structure

The various items that our Corporate Governance and Nominating Committee reviewed during its most recent assessment included, among other things:

 

  Ÿ  

The leadership positions that our firm should maintain (for example, Chairman, Lead Director and CEO) and the corresponding responsibilities and qualifications of these positions.

 

  Ÿ  

The effectiveness of the policies, practices and people in place to help ensure strong, independent Board oversight, including that:

 

  eight of 10 of our director nominees are independent under NYSE rules and under SEC heightened audit committee standards;

 

  all of our independent directors are members of our Board’s standing committees, and, accordingly, they are engaged in all aspects of the Board’s work;

 

  our independent directors meet regularly in executive session, and any independent director may call an executive session and raise matters for discussion at these executive sessions;

 

  all of our directors are free to contact any employee of our firm directly; and

 

  our Board and each committee may engage independent advisors at their sole discretion.

 

  Ÿ  

Our performance and the effect that a particular leadership structure had on our performance, including:

 

  our firm’s performance during Mr. Blankfein’s tenure over the past five years;

 

  our firm’s performance in 2011, including the impact of extrinsic factors such as broader economic conditions and uncertainty in the regulatory environment; and

 

  the lack of empirical evidence that board leadership structure has any effect on company performance.

 

  Ÿ  

The views of our shareholders on leadership structure, including that the average support for shareholder proposals requesting an independent chairman over the past three years was approximately 32%, and when shareholders last voted on this proposal at Goldman Sachs in 2010, support was approximately 19% (with over 80% of votes cast against).

Our Corporate Governance and Nominating Committee also reviewed the leadership structure at other global public companies, recent trends in leadership structure in the United States and globally and recent legislative and regulatory developments.

Our Corporate Governance and Nominating Committee determined to establish a position of “Lead Director,” rather than a “Presiding Director,” and to expand the enumerated duties of the Lead Director as described above. The full role

 

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and responsibilities of our Lead Director are set forth in our Corporate Governance Guidelines, which are available on our website at www.gs.com/guidelines. In addition, to compensate for the additional time and effort required by the Lead Director role, the Board, upon the recommendation of the Committee, determined to pay a $25,000 annual fee beginning in 2012 for the role.

Board Oversight

Our Board is responsible for and committed to the independent oversight of the business and affairs of our firm. In carrying out this responsibility, our Board advises our CEO and other members of our senior management to help drive success for our clients and long-term value creation for our shareholders. In addition, our Board discusses and receives regular updates on a wide variety of matters affecting our firm.

CEO Performance

Under the direction of our Lead Director, our Board’s Corporate Governance and Nominating Committee annually reviews Mr. Blankfein’s performance, as follows:

 

  Ÿ  

Mr. Blankfein is evaluated via our “360 degree” review process, which includes extensive narrative feedback from a wide range of colleagues.

 

  Ÿ  

Our Corporate Governance and Nominating Committee reviews the results of Mr. Blankfein’s evaluation and then communicates and discusses these results with Mr. Blankfein.

 

  Ÿ  

In addition, the independent directors regularly assess Mr. Blankfein’s performance based on their own interactions with him.

 

  Ÿ  

Our Corporate Governance and Nominating Committee’s assessment is then considered by our Compensation Committee when Mr. Blankfein’s compensation is determined. See —Compensation Matters—Compensation Discussion and Analysis—for a discussion of the factors considered by the Compensation Committee in setting Mr. Blankfein’s compensation.

Succession Planning

Succession planning is a priority for our Board. Our Corporate Governance and Nominating Committee, along with our CEO, has developed comprehensive programs and processes for both emergency and long-term executive succession, which are reviewed annually. Consistent with our culture of teamwork and our history of developing leaders, our goal is always to be in a position to appoint our most senior executives from within our firm.

Individuals who are identified as having potential for senior executive positions are evaluated by our Corporate Governance and Nominating Committee, in part using the results of the “360 degree” review process. These individuals’ careers are monitored to ensure that, over time, they have appropriate exposure both to our Board and to our diverse global businesses. These individuals interact with our Board in various ways, such as through participation in certain Board meetings and other Board-related activities as well as meetings with individual directors during director visits to our offices around the world.

Compensation

Our Compensation Committee recognizes that our compensation program must be consistent with the safety and soundness of our firm. Throughout the year, our Compensation Committee regularly reviews and receives updates on the design and function of our compensation program.

 

  Ÿ  

As part of our risk management, our Compensation Committee reviews our firmwide compensation program and policies to confirm that they do not encourage imprudent risk-taking and to confirm that there are no risks arising from these programs and policies that are reasonably likely to have a material adverse effect on our firm.

 

  Ÿ  

The overlap in membership between our Compensation Committee and our Risk Committee provides our Compensation Committee with a comprehensive picture of our firm’s risk management process, which informs and assists the Compensation Committee in its review of our compensation program.

 

  Ÿ  

Our CRO presents an annual compensation risk assessment to our Compensation Committee, meeting jointly with the Risk Committee, to assist our Compensation Committee in its assessment of the effectiveness of our compensation program in addressing risk. For further discussion of our Compensation Committee’s evaluation of risk, see —Compensation Matters—Compensation Discussion and Analysis.

 

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Risk Management

Risk is assessed from the standpoint of long-term share ownership, and our senior people are long-term shareholders.

We believe that effective risk management is of primary importance to the success of our firm. Accordingly, we have comprehensive risk management processes through which we monitor, evaluate and manage the risks we assume in conducting our activities. Our Board’s oversight of risk management processes is conducted primarily by our Risk Committee, which consists of all of our independent directors. Our Risk Committee regularly reviews and discusses with management our aggregate risk exposures, including:

 

  Ÿ  

market risk;

 

  Ÿ  

credit risk;

 

  Ÿ  

operational risk;

 

  Ÿ  

capital adequacy; and

 

  Ÿ  

key information relating to funding and liquidity.

In the course of these reviews, our Risk Committee interacts on a regular basis with our CFO and General Counsel, as well as with our CRO and other key risk management executives. Our Audit Committee also periodically discusses with management the guidelines and policies that govern our risk assessment and risk management processes, coordinating with our Risk Committee as appropriate. In addition, each of our Board’s standing committees, including our Risk Committee, considers the potential effect of any matter on our reputation when fulfilling its duties and responsibilities.

Financial Reporting

Our Board, through our Audit Committee, is responsible for overseeing management’s preparation and presentation of our annual and quarterly financial statements and the effectiveness of our internal control over financial reporting. In addition, our Audit Committee is directly responsible for overseeing the independence, performance and compensation of our independent auditors. Each quarter, our Audit Committee meets separately with members of our management and with our independent auditors to review and discuss our annual and quarterly financial statements as well as our quarterly earnings releases. Throughout the year, our Audit Committee meets separately with our CFO and General Counsel, with internal audit (the director of which is appointed by, and reports directly to, our Audit Committee) and with our independent auditors to discuss other financial reporting matters. For more information on our Audit Committee, see —Our Board Committees and Audit Matters—Report of our Audit Committee.

Strategy

Our Board reviews our firm’s strategy as proposed by our management team. Our Board receives presentations and discusses strategy throughout the year at Board meetings. In addition, our Board holds an annual multi-day meeting focused primarily on strategy. This annual meeting includes discussion about:

 

  Ÿ  

the competitive landscape and our firm’s relative position;

 

  Ÿ  

market trends; and

 

  Ÿ  

our strategic responses.

Our Board’s review of our risk management processes, as described above, enhances our directors’ ability to provide insight and feedback to senior management on our firm’s strategic direction. Senior management views the input of our independent directors as invaluable in discussions regarding our strategy.

Business Standards Committee

The BSC, which was created in 2010, engaged in an extensive eight-month review across every major business, region and activity of our firm. The objectives of the BSC were to develop recommendations designed to ensure that our firm’s business standards and practices are of the highest quality, meet or exceed the expectations of our clients, regulators and other stakeholders and contribute to overall financial stability and economic growth.

Our Board formed a committee of independent directors to oversee the BSC and keep the Board informed of the progress of the BSC; the members of the committee were extensively involved with the BSC, meeting 13 times as a committee during the BSC’s review. In January 2011, we released the report of the BSC, which included 39 recommendations and is available at www.gs.com/BSCreport. Over 400 of our people have been directly involved, and many more have been indirectly involved, as the BSC recommendations are integrated into the day-to-day operations of

 

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our firm. To monitor and supervise the implementation process, we created an oversight group comprising senior leaders across our firm. Our Board has received, and will continue to receive, periodic progress reports on the implementation of the BSC’s recommendations.

Most recently, senior management reported to our Board in January 2012 about our efforts to date, which have been extensive.

Employee participation in implementation has spanned every level, division and region, demonstrating the commitment and openness within our organization to improving and strengthening our firm. These efforts have served to catalyze a renewed focus on client service and client communication; on strengthening our controls, processes and committee governance; on greater personal accountability and reputational risk management; and on reinforcing attributes of our culture and values. Importantly, we established the Firmwide Client and Business Standards Committee, which is composed of many of our firm’s most senior leaders, and puts clients at the heart of our approach to governance. This includes applying an elevated standard of professional judgment to all aspects of our business activities and in everything we do. This committee, which receives periodic updates from both producing divisions as well as certain control functions, reports to the Board periodically on its activities.

In particular, the BSC emphasized the importance of articulating clearly both to our people and to our clients the nature of the roles we are asked to undertake across our various businesses, whether acting as advisor, fiduciary, market maker or underwriter. As part of the BSC, we retained an independent consultant to conduct non-attributable, in-depth, in-person discussions with senior management of a number of clients worldwide. Among the feedback we received was their desire for us to communicate more clearly the roles and responsibilities we undertake depending on the nature of the transaction and the objectives of the client.

To this end, we implemented the Role-Specific Client Responsibilities framework, which does not capture every possible client interaction, but is designed to facilitate better communication with clients about our specific responsibilities in a given transaction type or business activity. To date, over 8,000 of our people have taken part in training focused on the different roles and responsibilities we assume in working with our clients. A central theme of the training is the need to be clear to ourselves and to our clients about the capacity in which we are acting and the responsibilities we have assumed.

As of the end of the first quarter of 2012, a substantial majority of the BSC’s 39 recommendations had been fully implemented, and the implementation of the balance of the recommendations is in progress. However, as formal implementation of the BSC winds down, this is not the end of this process but, in many respects, the beginning. Because the focus of this effort is rooted more in the judgment of our people than a formal rule set for decision making, we will also look to multiple sources of feedback — our Board, our clients, our people, regulators and other key stakeholders — to ensure that our commitment to improvement is a living, breathing and dynamic process.

Commitment of our Board – 2011 Board Meetings

During 2011, our Board held 15 meetings. Our independent directors also met 13 times in executive session during 2011, which includes six executive sessions chaired by Mr. Bryan, as our Lead Director, and seven additional sessions during which our independent directors met without management present during meetings of the Audit, Risk and/or Compensation Committees.

Our directors meet informally from time to time to receive updates on business developments from senior management. In addition, our individual directors have discussions with each other, with our CEO and with other members of our senior management team, as events warrant. These informal discussions promote ongoing engagement between meetings and allow our directors to gain additional insight into our business as well as valuable perspective on the performance of our CEO and senior management. Our directors also receive weekly informational packages that include updates on recent developments, press coverage and current events that relate to our business.

Each of our current directors attended at least 75% of the meetings of our Board and the committees on which he or she served during 2011 for the period he or she served as director. Overall attendance at Board and committee meetings during 2011 averaged 96% for our current directors as a group.

We encourage our directors to attend our annual meetings. All of our current directors who were members of our Board at the time, other than Lakshmi N. Mittal, attended last year’s annual meeting. Mr. Mittal was unable to attend the annual meeting due to a family commitment.

Process for Selecting Directors

Our Corporate Governance and Nominating Committee seeks to build and maintain an effective, well-rounded, financially literate and diverse Board that operates in an atmosphere of candor and collaboration. Identifying and

 

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recommending individuals for nomination, election or re-election to our Board is a principal responsibility of our Corporate Governance and Nominating Committee. The Committee carries out this function through an on-going, year-round process, which includes the Committee’s annual evaluation of our Board. Throughout the year, members of the Committee discuss, evaluate in detail and meet with possible director candidates to join our Board. Potential director candidates may be brought to the attention of the Committee from a variety of sources, including our independent directors, our employees and our shareholders. To assist in identifying possible director candidates, the Committee has retained a professional search firm to provide the Committee with additional potential candidates and background information for review and consideration.

Our Corporate Governance and Nominating Committee does not set specific, minimum qualifications that director candidates must meet in order for the Committee to recommend them to our Board, but rather believes that each candidate should be evaluated based on his or her individual merits, taking into account our firm’s needs and the composition of our Board.

After the Committee’s initial review of a potential director candidate’s professional experience and assessment as to how a potential candidate will contribute to the needs of our Board, the Committee will determine whether to recommend the potential candidate to our Board for further consideration and a more in-depth review. Potential candidates are screened to determine their qualifications, any potential conflicts of interest and any barriers to a determination of independence.

In identifying and recommending director candidates, the Committee places primary emphasis on the criteria set forth in our Corporate Governance Guidelines, including:

 

  Ÿ  

judgment, character, expertise, skills and knowledge useful to the oversight of our business;

 

  Ÿ  

diversity of viewpoints, backgrounds, experiences and other demographics;

 

  Ÿ  

business or other relevant experience; and

 

  Ÿ  

the extent to which the interplay of the candidate’s expertise, skills, knowledge and experience with that of other members of our Board will build a board that is effective, collegial and responsive to the needs of our firm.

Our Board believes that diversity is an important attribute of a well-functioning board. In selecting qualified candidates to serve as directors, the Committee considers a range of types of diversity, including race, gender, ethnicity, culture, nationality and geography, seeking to develop a board that, as a whole, reflects diverse viewpoints, backgrounds, skills, experiences and expertise. Among the factors our Corporate Governance and Nominating Committee considers in identifying and evaluating a potential director candidate is the extent to which the candidate would add to the diversity of our Board, and the Committee considers the same factors in determining whether to re-nominate an incumbent director. In both cases, the Committee assesses the diversity of our Board and how a nominee would enhance that diversity.

Our Corporate Governance and Nominating Committee will consider candidates recommended by shareholders in the same manner as other candidates. Shareholders who wish to submit potential director candidates for consideration by our Corporate Governance and Nominating Committee should follow the instructions in Frequently Asked Questions About our Annual Meeting.

Board Evaluation

The Corporate Governance and Nominating Committee, which includes all of our independent directors, is responsible for annually evaluating the performance of our Board. Led by our Lead Director, independent directors provide input on numerous issues, such as:

 

  Ÿ  

effectiveness of their work as a Board;

 

  Ÿ  

oversight of management;

 

  Ÿ  

quality of their interactions with, and information received from, management as well as those below management level;

 

  Ÿ  

satisfaction with the Board’s involvement in strategy discussions;

 

  Ÿ  

topics that should receive more attention and discussion; and

 

  Ÿ  

adequacy and effectiveness of our governance practices.

Our Lead Director communicates a summary of the results of this evaluation to our full Board, and our Board’s policies and practices are updated as appropriate as a result of director feedback.

 

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Independence of Directors

Independent oversight bolsters our success. A director is considered independent under NYSE rules if our Board determines that the director does not have any direct or indirect material relationship with Goldman Sachs. Our Board has established a Policy Regarding Director Independence (Director Independence Policy), which is available on our website at www.gs.com/independence, and which provides standards to assist our Board in determining which relationships and transactions might constitute a material relationship that would cause a director not to be independent. The Director Independence Policy covers, among other things, employment and compensatory relationships, relationships with our auditors, client and business relationships and contributions to tax-exempt organizations.

Our Board has determined, upon the recommendation of our Corporate Governance and Nominating Committee, that all eight of our non-executive director nominees (Ms. Burns, Mr. Dahlbäck, Mr. Friedman, Mr. George, Mr. Johnson, Mr. Mittal, Mr. Schiro and Dr. Spar) as well as Mr. Bryan and Ms. Juliber are “independent” within the meaning of NYSE rules and our Director Independence Policy. Prior to his retirement from our Board in 2011, H. Lee Scott, Jr., who served as a director for a portion of the year, was also determined to be independent.

To assess independence, our Corporate Governance and Nominating Committee and our Board are provided with detailed information about any relationships between the independent directors (and their immediate family members) on the one hand, and Goldman Sachs and its affiliates and subsidiaries on the other. For example, the Committee receives personal data sheets for each independent director that contain, among other things, information about the director’s professional experience, investments, tax-exempt affiliations and immediate family members. In many instances, the information provided for this independence assessment, such as transactions with companies where the independent director’s only involvement is as an independent director of such other company or contributions to tax-exempt organizations where he or she is only a trustee or director, goes beyond the information that we are required to take into account pursuant to SEC and NYSE rules.

Specifically, our Corporate Governance and Nominating Committee and our Board reviewed and considered the following categories of transactions, which our Board has determined may be deemed immaterial under our Director Independence Policy. For more detail on these transactions, see —Certain Relationships and Related Transactions—as well as —Additional Details on Director Independence—in Annex A.

 

  Ÿ  

Ordinary course business transactions between us and an entity where a director or immediate family member is or was during 2011:

 

  an executive officer or employee – Burns, George (and a family member), Mittal* (and a family member) and Spar

 

  a non-executive board member or a similar position – Burns, Dahlbäck (and a family member), Friedman, George, Johnson, Juliber (and a family member), Mittal (and family members) and Schiro

 

  a less than 5% equity holder or limited partner and an investment advisor, advisory director or similar position – Dahlbäck, Friedman, George and Johnson

 

  an executive officer, employee, trustee, board member or similar position of a tax-exempt organization – Bryan, Dahlbäck, Friedman (and family members), George (and family members), Johnson, Juliber (and a family member), Mittal (and family members), Schiro (and a family member) and Spar

 

  Ÿ  

Charitable donations made in the ordinary course (including pursuant to our matching gift program) by us, The Goldman Sachs Foundation or GS Gives to a tax-exempt organization where the director or immediate family member is an employee, trustee, board member or has a similar position – Bryan (and a family member), Burns, Friedman (and family members), George (and a family member), Johnson, Juliber (and family members), Mittal (and family members), Schiro (and a family member) and Spar

 

  Ÿ  

Client relationships where the director or an immediate family member is our client (for example, brokerage, discretionary and other similar accounts) on substantially the same terms as similarly-situated clients – Bryan (and family members), Friedman (and family members), George (and family members), Juliber (and a family member), Mittal (and family members), Schiro (and a family member) and Spar

 

*  Given Mr. Mittal’s significant equity ownership in ArcelorMittal, our Corporate Governance and Nominating Committee and our Board considered the business transactions between ArcelorMittal and Goldman Sachs, as well as Mr. Mittal’s position within ArcelorMittal, in evaluating his independence. Because these transactions were in the ordinary course of business for both parties and the related revenues constituted a small percentage of the revenues of ArcelorMittal and Goldman Sachs (in each case, less than 0.015% of 2011 consolidated gross revenues), our Corporate Governance and Nominating Committee and our Board determined that these transactions do not create a material relationship between Mr. Mittal and Goldman Sachs, and that Mr. Mittal is independent within the meaning of the rules of the NYSE.

 

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  Ÿ  

Fund investments by a director, on substantially the same terms as similarly-situated clients, in funds sponsored or managed by us – Bryan, Friedman, George, Juliber, Mittal and Schiro

Our Board Committees

Our Board has four standing committees: Audit, Compensation, Corporate Governance and Nominating and Risk. Each of these committees operates pursuant to a written charter available on our website at www.gs.com/charters.

Each committee consists solely of directors who our Board has determined, upon the recommendation of our Corporate Governance and Nominating Committee, are independent under NYSE rules. Furthermore, our Board has determined that all of our independent directors satisfy the heightened audit committee independence standards under NYSE and SEC rules.

All of our standing committees evaluate their performance and review their charters annually.

 

    

Committee

Chair

  Meetings in 2011    Primary Purposes

Audit

 

James J. Schiro

(Ms. Burns will be Chair effective May 23, 2012)

 

13

  

Ÿ  Assist our Board in its oversight of our financial statements, legal and regulatory compliance, independent auditors’ qualification, independence and performance, internal audit function performance and internal control over financial reporting.

Ÿ  Decide whether to appoint, retain or terminate our independent auditors.

Ÿ  Pre-approve all audit, audit-related, tax and other services, if any, to be provided by the independent auditors.

Ÿ  Prepare the Audit Committee Report.

Compensation

 

James A. Johnson

  8, as well as 2 meetings in early 2012 to discuss and make determinations regarding 2011 compensation   

Ÿ  Determine and approve the compensation of our CEO and other executive officers.

Ÿ  Approve, or make recommendations to our Board for it to approve, our incentive compensation and equity-based plans.

Ÿ  Assist our Board in its oversight of the development, implementation and effectiveness of our policies and strategies relating to our human capital management function, including:

– recruiting;

– retention;

– career development and progression;

– management succession (other than that within the purview of the Corporate Governance and Nominating Committee); and

– diversity and employment practices.

Ÿ  Prepare the Compensation Committee Report.

Corporate Governance

and Nominating

 

John H. Bryan

(Mr. Schiro will be Chair

effective May 23, 2012)

 

6

  

Ÿ  Recommend individuals to our Board for nomination, election or appointment as members of our Board and its committees.

Ÿ  Oversee the evaluation of the performance of our Board and our CEO.

Ÿ  Review and concur in the succession plans for our CEO and other members of senior management.

Ÿ  Take a leadership role in shaping our corporate governance, including developing, recommending to the Board and reviewing on an ongoing basis the corporate governance principles and practices that apply to Goldman Sachs.

Ÿ  Review periodically the form and amounts of director compensation and make recommendations to the Board with respect thereto.

Risk

 

Stephen Friedman

 

6

  

Ÿ  Assist our Board in its oversight of our firm’s management of financial and operational risks, including market, credit and liquidity risk.

Ÿ  Review and discuss with management our firm’s capital plan, regulatory capital ratios and internal capital adequacy assessment process and the effectiveness of our financial and operational risk management policies and controls.

 

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The firm’s reputation is of critical importance. In fulfilling their duties and responsibilities, each of our standing committees and our Board considers the potential effect of any matter on our reputation.

In addition to regular meetings of the committees, in carrying out the responsibilities of the committees, committee chairs meet regularly with members of our management.

 

  Ÿ  

Mr. Schiro, as the Chair of our Audit Committee, frequently met or had discussions with our CFO, General Counsel, Director of Internal Audit, Controller, Global Head of Compliance and independent auditors.

 

  Ÿ  

Mr. Johnson, as the Chair of our Compensation Committee, frequently met or had discussions with the Co-Chairs of our internal Compensation Policy Committee, including our CFO.

 

  Ÿ  

Mr. Bryan, as the Chair of our Corporate Governance and Nominating Committee, frequently met or had discussions with our CEO, Secretary to our Board and General Counsel.

 

  Ÿ  

Mr. Friedman, as the Chair of our Risk Committee, frequently met or had discussions with our CFO and our General Counsel, as well as our CRO and other key risk management employees.

Audit Committee Financial Expert

Our Board, upon the recommendation of our Corporate Governance and Nominating Committee, has determined that each member of our Audit Committee is financially literate and that a majority of the members of our Audit Committee, including the Chair, are “audit committee financial experts” within the meaning of the rules of the SEC.

Compensation Committee’s Independent Consultant

Our Compensation Committee has for several years recognized the importance of using an independent consultant that provides services solely to the Committee and not to our firm. Our Compensation Committee continued to retain Semler Brossy Consulting Group LLC (Semler Brossy) as its independent compensation consultant in 2011. See —Compensation Matters—Compensation Discussion and Analysis—for a discussion of Semler Brossy’s assessment of our compensation program for Participating Managing Directors (PMDs).

 

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Compensation Matters

 

Compensation Discussion and Analysis

Our Compensation Committee, which is comprised of all of our independent directors, determined the 2011 compensation of our NEOs: Mr. Blankfein, our CEO, Mr. Cohn, our President and COO, Mr. Viniar, our CFO, Mr. Evans, a Vice Chairman, Global Head of Growth Markets and Chairman of Goldman Sachs Asia Pacific and Mr. Weinberg, a Vice Chairman and Co-Head of Investment Banking.

 

NEO Compensation Highlights

 

  Ÿ  

Compared to 2010, 2011 annual compensation as approved by our Compensation Committee for each NEO was down approximately 35%, while 2011 annual variable compensation for each NEO was down approximately 44%. 2011 net revenues were 26% lower than 2010.

 

 

  Ÿ  

70% of the 2011 annual variable compensation awarded to our NEOs was in the form of 61,702 vested RSUs, and the remainder was in cash ($3 million). The terms of these RSUs are the same as the RSUs awarded to our NEOs last year, including:

 

– Shares at Risk generally deliver in three equal installments in each of January 2013, January 2014 and January 2015.

– Five-year transfer restrictions (through January 2017) apply to 50% of the gross number of Shares at Risk, which is determined prior to tax withholding. For our NEOs, because the withholding rate currently is close to 50%, transfer restrictions will apply to substantially all Shares at Risk delivered to them under these awards.

– RSUs and Shares at Risk are subject to forfeiture or recapture by us as described below.

 

  Ÿ  

All of our NEOs must retain 75% of the after-tax shares they receive as compensation (all other PMDs must retain at least 25% of such shares).

 

 

  Ÿ  

All of our NEOs (and all other executive officers) are prohibited from hedging any shares of Common Stock, including those that they can freely sell (all other PMDs may hedge only shares that they can freely sell).

 

 

  Ÿ  

None of our NEOs has an employment agreement that provides for severance or “golden parachute” payments.

 

 

  Ÿ  

2011 compensation available for our PMDs, including our NEOs, was reduced by $78 million in the aggregate for us to make a charitable contribution to GS Gives, our donor advised fund.

 

 

  Ÿ  

In February 2012, our Compensation Committee granted to each of our NEOs a long-term incentive compensation award under our LTIP with an initial notional value of $3 million. These awards are not considered part of annual compensation because no amounts are earned until the end of the performance period (January 2015 or, if extended, no later than January 2020).

 

Please see below for details on each element of our NEO compensation.

 

 

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Our Compensation Philosophy

Our compensation philosophy and the objectives of our compensation program are reflected in our Compensation Principles, which guide our Compensation Committee in its review of compensation at our firm, including the Committee’s determination of NEO compensation. Our Compensation Principles are available on our public website, and we also include them for your reference in Annex B to this Proxy Statement. We discuss below some of the key elements of our compensation philosophy.

Attracting and Retaining Talent. We understand the importance of hiring and retaining the very best people. Retention of talented employees is critical to executing our business strategy successfully. Compensation is, therefore, a key component of the costs we incur to generate our revenues, like the cost of goods sold or manufacturing costs in other industries.

In determining the compensation of our NEOs and in reviewing generally the effectiveness of our compensation program for attracting and retaining talent, our Compensation Committee reviews the competitive market for talent. Our goal is always to be in a position to appoint our most senior executives from within our firm. We believe that our compensation program should incentivize our people both to continue to work at our firm and to aspire to senior executive roles. We are proud that our NEOs have an average tenure of approximately 26 years with our firm, and that the members of our Management Committee (currently our 29 most senior executives, including our NEOs) have an average tenure of approximately 21 years with our firm.

Maintaining Safety and Soundness. We recognize that our compensation program must be consistent with the safety and soundness of our firm. Our CRO presents an annual compensation-related risk assessment to our Compensation Committee, meeting jointly with our Risk Committee, to assist our Compensation Committee in its assessment of the effectiveness of our compensation program in addressing risk. The assessment is particularly focused on whether our program is consistent with regulatory guidance that financial services firms should ensure that variable compensation does not encourage inappropriate risk-taking.

In the 2011 assessment, our CRO presented his view that the various components of our compensation programs and policies (for example, process, structure and governance) work together to balance risk and incentives in a manner that does not encourage inappropriate risk-taking. In addition, our CRO stated that our firm has a risk management process that, among other things, is consistent with the safety and soundness of our firm and focuses on our:

 

  Ÿ  

risk management culture: while the nature of our business requires certain employees to make decisions involving the use of our capital on a daily basis, our firm’s culture emphasizes continuous and prudent risk management;

 

  Ÿ  

risk-taking authority: there is a formal process for identifying employees who, individually or as part of a group, have the ability to expose us to material amounts of risk (Covered Employees);

 

  Ÿ  

upfront risk management: we have tight controls on the allocation, utilization and overall management of risk- taking, as well as comprehensive profit and loss and other management information which provide ongoing performance feedback;

 

  Ÿ  

compensation structure and policies: there are rigorous, multi-party (i) employee performance assessments and (ii) compensation decisions; and

 

  Ÿ  

governance: the oversight of our Board, our management structure and the associated processes all contribute to a strong control environment, and control functions have input into compensation structure and design.

We have a compensation framework (Compensation Framework), approved by our Compensation Committee, governing the variable compensation process for our Covered Employees, which includes our NEOs. Our Compensation Framework, which is consistent with our Compensation Principles:

 

  Ÿ  

is designed to comply with applicable regulations and regulatory guidance on variable compensation and is updated as appropriate for changes in such guidance and regulations;

 

  Ÿ  

seeks to achieve balance between risk and reward through, among other things, a robust up-front risk-adjustment process for assessing performance;

 

  Ÿ  

formalizes and documents the roles of our CFO, CRO, divisional compensation committees and others in the compensation process; and

 

  Ÿ  

requires comprehensive monitoring of the implementation of our compensation process.

 

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Prudent risk management is a hallmark of our firm’s culture, and sensitivity to risk and risk management are key elements in assessing employee performance. We require that each employee be evaluated annually as a part of our “360 degree” feedback process. This process reflects input from a number of employees, including supervisors, peers and those who are junior to the employee, regarding an array of performance measures. The detailed performance evaluations include assessments of risk management, reputational judgment and compliance with firm policies, as well as teamwork, citizenship and communication.

In addition, our business lines each have different risk profiles and these are taken into account when determining compensation. Risks that are considered include credit, market, liquidity and operational risks, as well as legal, compliance and reputational risks. We provide guidelines to assist compensation managers when applying discretion during the compensation process to promote consistent consideration of the differing risks presented by our firm’s businesses. Our CRO is involved in the compensation process and reviews the risks and risk-adjusted metrics applicable to each business, as well as the manager guidelines.

Further, to ensure the independence of our control function employees, compensation for those employees is not determined by individuals in revenue-producing positions.

Encouraging Long-Term Firmwide Focus. We believe that compensation should encourage a long-term, firmwide approach to performance and discourage inappropriate risk-taking. Paying a significant portion of variable compensation to our senior employees in the form of equity-based awards that deliver over time and are subject to forfeiture or recapture encourages a long-term, firmwide focus because their value is realized through long-term responsible behavior and the financial performance of our firm. We impose transfer restrictions, retention requirements and hedging policies to further align the interests of our senior employees with those of our shareholders. Our retention policies, coupled with our practice of paying our senior employees a significant portion of their variable compensation in the form of equity-based awards, leads to a considerable investment in our Common Stock over time. We believe that this investment advances our partnership culture of teamwork and stewardship of our firm. In addition, our LTIP is designed to further align incentive compensation with long-term performance in a manner that does not encourage inappropriate risk-taking.

For 2011, our PMDs received a significant portion of their variable compensation in the form of RSUs, with our NEOs receiving 70% of their 2011 annual variable compensation in RSUs. Shares at Risk generally deliver over a three-year period, even after employees leave our firm. In addition, a significant portion of the Shares at Risk are subject until January 2017 to transfer restrictions, which continue following retirement. These deferred delivery schedules and transfer restrictions are consistent with awards granted to our PMDs for 2008, 2009 and 2010, although our NEOs did not receive any variable compensation for 2008.

As in 2009 and 2010, 2011 RSUs and Shares at Risk are subject to a number of terms and conditions that could result in forfeiture or recapture by us, including, as discussed further below, engaging in any conduct detrimental to our firm or in improper risk analysis. Our Compensation Committee approved guidelines in 2011 that set forth a formal process regarding determinations to forfeit or recapture awards for improper risk analysis upon the occurrence of certain pre-determined events (for example, in the event of any annual firmwide, divisional or business unit losses). The review of whether forfeiture or recapture is appropriate includes input from our CRO, as well as representatives from our controllers, legal and compliance departments. Determinations are made by our Compensation Committee (including any determinations for NEOs) or its delegates, with any determinations made by delegates reported to the Committee.

Shares at Risk that are subject to transfer restrictions remain subject to forfeiture or recapture for certain events that occur after delivery through the end of the restricted period (i.e., January 2016 for 2010 awards and January 2017 for 2011 awards). These events include engaging in any conduct detrimental to our firm.

We require each of our CEO, CFO, COO and three Vice Chairmen, for so long as each holds one of these positions, to retain sole beneficial ownership (including, in certain cases, ownership through such person’s spouse or estate planning entities established by such person) of a number of shares of Common Stock equal to at least 75% of the shares received (net of payment of any option exercise price and taxes) under our firm’s equity plans since becoming a senior executive. We impose a similar 25% retention requirement on our approximately 430 PMDs (as of March 31, 2012). The retention requirements are described in more detail in Beneficial Ownership—Beneficial Ownership of Directors and Executive Officers.

All of our employees are prohibited from hedging their equity-based awards, as well as shares of Common Stock with transfer restrictions, including after retirement. All of our executive officers, including our NEOs, are prohibited from

 

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hedging any shares of our Common Stock, even shares they can freely sell. Our employees, other than our executive officers, may hedge only shares of Common Stock that they can otherwise sell. However, they may not enter into uncovered hedging transactions and may not “short” shares of our Common Stock. In addition, employees may not make investment decisions with respect to our Common Stock unless such decisions are made during applicable “window periods.”

Reflecting Performance. We are committed to aligning compensation with performance. In order to do so, we look at our firm’s performance and the individual’s performance over the past year, as well as over the past several years. We believe that our senior people have responsibility for our overall performance and, as a result, have experienced more substantial changes in their compensation, particularly in periods when our net revenues have declined significantly.

We believe that multi-year guarantees should be avoided entirely to avoid misaligning compensation and performance, and guaranteed employment contracts should be used only in exceptional circumstances (for example, for certain new hires). None of our NEOs has an employment agreement that provides for severance or “golden parachute” payments.

2011 NEO Compensation

Our Compensation Committee determined the form and amount of annual compensation to be awarded to our NEOs for 2011, as set forth in the following table. The determinations of the amounts awarded were not formulaic and were not based on specific firmwide or individual performance targets or objectives. We have also included for comparative purposes the annual compensation awarded to our NEOs for fiscal 2008, fiscal 2009 and fiscal 2010. The LTIP awards (discussed below) are not considered part of annual compensation because no amounts are earned until the end of the performance period (January 2015 or, if extended, no later than January 2020), and are not included in this table.

 

               Annual Compensation — $ Value         
                          Variable Compensation                
Name and Principal Position   Year           Salary           Cash*      RSUs
Deliverable as
Shares at Risk**
     Total      Equity as % of
Variable
Compensation
 

Lloyd C. Blankfein

Chairman and CEO

    2011             $2,000,000             $3,000,000         $  7,000,000         $12,000,000         70   
    2010             600,000             5,400,000         12,600,000         18,600,000         70   
    2009             600,000             0         9,000,000         9,600,000         100   
      2008             600,000             0         0         600,000         N/A   

Gary D. Cohn

President and COO

    2011             1,850,000             3,000,000         7,000,000         11,850,000         70   
    2010             600,000             5,400,000         12,600,000         18,600,000         70   
    2009             600,000             0         9,000,000         9,600,000         100   
      2008             600,000             0         0         600,000         N/A   

David A. Viniar

CFO

    2011             1,850,000             3,000,000         7,000,000         11,850,000         70   
    2010             600,000             5,400,000         12,600,000         18,600,000         70   
    2009             600,000             0         9,000,000         9,600,000         100   
      2008             600,000             0         0         600,000         N/A   

J. Michael Evans

Vice Chairman

    2011             1,850,000             3,000,000         7,000,000         11,850,000         70   
    2010             600,000             5,400,000         12,600,000         18,600,000         70   
    2009             600,000             0         9,000,000         9,600,000         100   
      2008             600,000             0         0         600,000         N/A   

John S. Weinberg

Vice Chairman

    2011             1,850,000             3,000,000         7,000,000         11,850,000         70   
    2010             600,000             5,400,000         12,600,000         18,600,000         70   
    2009             600,000             0         9,000,000         9,600,000         100   
      2008             600,000             0         0         600,000         N/A   

 

* Cash amounts for 2011 were paid in February 2012.

 

** The “RSUs Deliverable as Shares at Risk” amounts reflect the gross dollar amounts determined by our Compensation Committee. The grant date fair value of the 2011 award determined in accordance with generally accepted accounting principles, which includes a liquidity discount to reflect transfer restrictions on Shares at Risk, for each NEO was approximately $5.27 million. In accordance with SEC rules, the 2011 Summary Compensation Table below does not include these amounts because they were not granted in 2011. Instead, the 2012 Summary Compensation Table to be included in our proxy statement for our 2013 Annual Meeting of Shareholders will include the grant date fair value of these awards for named executive officers in that proxy statement.

 

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In determining the amount and form of compensation to be awarded to our NEOs, our Compensation Committee considered (i) our financial performance, including our performance relative to our core competitors, (ii) the individual and collective performance of our NEOs, (iii) a compensation-related risk assessment from our CRO and (iv) in connection with our goal of attracting and retaining the best talent, the compensation levels and practices of other financial services firms. Our Compensation Committee also considered regulatory developments, the broader environment and the results of last year’s advisory vote on NEO compensation and related shareholder feedback.

Financial Performance. Our performance in 2011 declined from 2010. Global macro-economic concerns and difficult market conditions persisted for much of the year. However, we retained our industry-leading positions while prudently managing risk, capital and expenses.

We generated net revenues of $28.81 billion and net earnings of $4.44 billion for 2011, compared to net revenues of $39.16 billion and net earnings of $8.35 billion for 2010. Our ROE was 3.7% for 2011, and our adjusted ROE for 2011 was 5.9%, excluding the preferred dividend on the 50,000 shares of our 10% Cumulative Perpetual Preferred Stock, Series G (Series G Preferred Stock), as described in Calculation of Adjusted Return on Average Common Shareholders’ Equity in Annex C. As of December 31, 2011, our book value per common share (BVPS) was $130.31, approximately 1% higher compared with the end of 2010. We continued to manage our capital conservatively. Our tier 1 capital ratio, calculated in accordance with the Board of Governors of the Federal Reserve System’s (Federal Reserve Board) capital adequacy regulations currently applicable to bank holding companies (which are based on the “Basel 1” Capital Accord of the Basel Committee on Banking Supervision), was 13.8% as of December 31, 2011. Our global core excess, which represents a pool of excess liquidity consisting of unencumbered, highly liquid securities and cash that is intended to allow us to meet a broad range of potential cash outflows and collateral needs in a stressed environment, was $172 billion as of December 31, 2011. For more information on the calculation of these financial measures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2011 Annual Report on Form 10-K.

In connection with making compensation decisions, our Compensation Committee reviews with our CFO the following financial metrics and year-over-year changes:

 

  Ÿ  

ROE;

 

  Ÿ  

Diluted earnings per share;

 

  Ÿ  

BVPS;

 

  Ÿ  

Net earnings;

 

  Ÿ  

Net revenues;

 

  Ÿ  

Compensation and benefits expense;

 

  Ÿ  

Ratio of compensation and benefits to net revenues; and

 

  Ÿ  

Non-compensation expense.

No specific goals for these metrics were used, nor were any specific weights ascribed to them, in making compensation determinations. In addition, our Compensation Committee reviews with our CFO certain financial metrics, based on publicly announced results, for our core competitors: Bank of America Corporation, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley.

Individual Performance. All of our NEOs participated in our “360 degree” feedback process (discussed above) as part of their individual evaluations, which included an assessment of risk management, reputational judgment and compliance, client focus, as well as leadership and people management. Our Corporate Governance and Nominating Committee, which includes all of the members of our Compensation Committee, reviewed and discussed the results of this process for our CEO. In addition, our Compensation Committee met in executive session to discuss the performance of our CEO.

Our CEO discussed the performance of our COO, including the results of his “360 degree” evaluation, with our Compensation Committee, and our CEO and COO reviewed the performance of our other NEOs, including the results of their “360 degree” evaluations, with the Committee. Our CEO submitted variable compensation recommendations to the Committee for our other NEOs. Our CEO did not make recommendations about his own compensation.

 

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Our NEOs have shown exceptional leadership in 2011 and over the last few years. Their performance throughout the year was outstanding. The continued economic challenges and broader regulatory changes affecting the industry place an even greater importance on teamwork among our NEOs, who continued in 2011 to operate very much as a team. This emphasis on teamwork is consistent with our compensation philosophy, which encourages focusing on our firm’s overall success rather than solely on individual objectives or achievements.

Compensation-Related Risk Assessment. As discussed above, our CRO presented his annual compensation-related risk assessment to our Compensation Committee, meeting jointly with our Risk Committee. He presented his view that the various components of our firm’s compensation programs and policies (for example, process, structure and governance) work together to balance risk and incentives in a manner that does not encourage inappropriate risk-taking and, therefore, there are no risks arising from such programs and policies that are reasonably likely to have a material adverse effect on our firm. Our CRO’s assessment also stated that our firm has a risk management process so that variable compensation does not encourage inappropriate risk-taking, is aligned with the future performance of our firm and the interests of our shareholders, and is consistent with the safety and soundness of our firm (we describe under Our Compensation Philosophy above more details from his assessment on our risk management process). Semler Brossy also participated in this presentation.

Market for Talent. Our Compensation Committee evaluated our existing NEO compensation program, comparing our plans to those of other financial services firms and examining alternatives. Consistent with past practice, our Compensation Committee asked Semler Brossy during 2011 to assess our compensation program for our PMDs, which includes our NEOs, and to identify the challenges and accompanying considerations that could inform compensation decisions for 2011. Semler Brossy provides services solely to our Compensation Committee and does not provide services in any capacity to our firm. In connection with its work for our Compensation Committee, Semler Brossy reviews the information provided to the Committee by our CFO, our Human Capital Management Division (HCM Division) and our firm’s compensation consultants.

In its assessment of our compensation program for PMDs, Semler Brossy confirmed that, consistent with last year, the program has been aligned with, and is sensitive to, corporate performance, contains features that reinforce significant alignment with shareholders and a long-term focus, and utilizes policies and procedures, including subjective determinations, that appropriately encourage PMDs to address known and perceived risks. Semler Brossy also identified current challenges facing the PMD compensation program and outlined considerations for both 2011 compensation decisions and ongoing compensation program design. Semler Brossy did not recommend, and was not involved in determining, the amount of any NEO’s compensation.

Our HCM Division assisted our Compensation Committee in the Committee’s review of compensation plans at other financial services firms by providing the Committee with information relating to compensation plan design and compensation levels for named executive officers and, in most cases, other senior employees at these firms. The firms for which information was provided were our core competitors plus American Express Company, Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG, UBS AG and Wells Fargo & Company. This information was obtained from an analysis of public filings, except for information not covered by public filings, which was based on compensation surveys conducted by the MGMC unit of Towers Watson.

Regulatory Developments. Throughout 2011, our senior management briefed our Compensation Committee on relevant regulatory developments. These included updates on compensation-related regulations and guidance issued by the Federal Reserve Board and other U.S. federal banking regulators, the Financial Stability Board, the Financial Services Authority in the United Kingdom and other regulators around the world. In addition, our senior management briefed our Compensation Committee on our interactions with regulators regarding our compensation program.

Determinations regarding NEO compensation for 2011 were consistent with our Compensation Framework, which we believe is consistent with applicable regulations and regulatory guidance on variable compensation.

2011 Advisory Vote to Approve Executive Compensation. At our 2011 Annual Meeting of Shareholders, the advisory vote to approve executive compensation received the support of a majority of our shareholders (approximately 73% of votes cast). Our Compensation Committee considered these results in connection with its analysis of our executive compensation programs, including its determination of the form and amount of NEO compensation for 2011.

We engaged with many of our shareholders in advance of and following our 2011 Annual Meeting of Shareholders in order to gain further insight and understanding into their views on our executive compensation program, particularly as expressed through the advisory vote.

 

 

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We received feedback on various aspects of our executive compensation program, including our pay-for-performance philosophy, our LTIP structure and shareholders’ expectations with respect to compensation amounts in light of our firm’s 2011 performance. The feedback from shareholder discussions was communicated to our Compensation Committee for its consideration, and the Committee took into account such feedback in making its determinations.

Ultimately, our Compensation Committee determined to decrease each NEO’s annual variable compensation for 2011 by approximately 44% over the amounts awarded for 2010 because of our decline in performance in 2011, reflecting our pay-for-performance philosophy. The Committee determined, based on the individual and collective performance and teamwork of our NEOs, that the variable compensation for each of them would be the same for 2011. There were no specific individual performance goals that were used by the Committee in making NEO compensation determinations. Consistent with regulatory guidance and our CRO’s annual compensation-related risk assessment, the Committee determined that the appropriate balance of 2011 variable compensation was to pay 70% in RSUs and the remainder in cash. We reduced the 2011 compensation available for our PMDs, including our NEOs, by $78 million in the aggregate for us to make a charitable contribution to GS Gives. In February 2012, our Compensation Committee granted to each NEO a long-term incentive compensation award, which we discuss below.

Additional Details on our NEOs’ 2011 Compensation

Salaries. For 2011, Mr. Blankfein received a salary of $2 million and Mr. Cohn, Mr. Viniar, Mr. Evans and Mr. Weinberg received a salary of $1.85 million. Our Compensation Committee believes that these salary levels provide the appropriate balance between fixed and variable compensation. 2012 salaries remain unchanged from 2011 levels.

Restricted Stock Units and Shares at Risk. RSUs were vested at grant and generally provide for Shares at Risk to be delivered in three equal installments in each of January 2013, January 2014 and January 2015.

Each of these RSUs is an unfunded, unsecured promise by us to deliver a Share at Risk on a predetermined date. As a result, each of our NEOs becomes, economically, one of our long-term shareholders, with the same interests as our other shareholders. This economic interest results because the amount an NEO ultimately realizes from an RSU depends on the value of Common Stock. Each vested RSU includes a “dividend equivalent right,” pursuant to which the holder of the RSU is entitled to receive an amount equal to any ordinary cash dividends paid to a shareholder of Common Stock at about the same time as those dividends are paid to our shareholders.

The number of RSUs awarded to each NEO for 2011 was determined by dividing the dollar value of the portion of the NEO’s variable compensation payable in RSUs (i.e., 70%) by $113.45, which was the closing price-per-share of our Common Stock on the NYSE on February 1, 2012, the grant date.

Transfer Restrictions. Transfer restrictions apply to 50% of the gross number of Shares at Risk, which is determined prior to tax withholding. For our NEOs, because the withholding rate currently is close to 50%, transfer restrictions will apply to substantially all Shares at Risk delivered to them under these awards. An NEO cannot sell, exchange, transfer, assign, pledge, hedge or otherwise dispose any of his RSUs or Shares at Risk that are subject to transfer restrictions until January 2017, even if the NEO is no longer an employee of our firm (see —Treatment Upon Termination or Change-in-Control—for more details). Our Compensation Committee may permit limited exceptions to make transfers (for example, gifts to immediate family members), provided that any Shares at Risk so transferred would continue to be subject to transfer restrictions until January 2017. Further, as stated above, our NEOs are required to retain 75% of the after-tax shares of Common Stock they receive as compensation, and are prohibited from hedging any shares of Common Stock, including those they can freely sell.

Forfeiture and Recapture Provisions. All RSUs and all Shares at Risk are subject to forfeiture or recapture by us in certain cases, even after an NEO receives delivery of the Shares at Risk and transfer restrictions lapse. If we determine that Shares at Risk may be recaptured after delivery, we can require repayment to us of the fair market value of the shares when delivered (including those withheld to pay withholding taxes).

The RSUs and Shares at Risk provide for forfeiture or recapture if our Compensation Committee determines that during 2011, the NEO participated (which could include, depending on the circumstances, participation in a supervisory role) in the structuring or marketing of any product or service, or participated on behalf of our firm or any of our clients in the purchase or sale of any security or other property, in any case without appropriate consideration of the risk to our firm or the broader financial system as a whole (for example, if an NEO were to improperly analyze risk or fail sufficiently to raise concerns about such risk) and, as a result of such action or omission, our Compensation Committee determines there has been, or reasonably could be expected to be, a material adverse impact on our firm, the NEO’s

 

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business unit or the broader financial system. This provision is not limited to financial risks and is designed to encourage the consideration of the full range of risks associated with the activities (for example, legal, compliance or reputational). The provision also does not require that a material adverse impact actually occur, but rather may be triggered if we determine that there is a reasonable expectation of such an impact. Our Compensation Committee has adopted guidelines that set forth a formal process regarding determinations to forfeit or recapture under this provision, which we discuss above.

RSUs granted to our NEOs also are subject to forfeiture until delivery of the underlying Shares at Risk if our firm is determined by bank regulators to be “in default” or “in danger of default” as defined under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or fails to maintain for 90 consecutive business days the required “minimum tier 1 capital ratio” (as defined under Federal Reserve Board regulations).

An NEO may forfeit all 2011 RSUs if he engages in conduct constituting “cause” prior to delivery of the underlying Shares at Risk. We may recapture Shares at Risk subject to transfer restrictions if an NEO engages in such conduct at any time through January 2017. “Cause” includes, among other things, any material violation of any firm policy; any act or statement that negatively reflects on our name, reputation or business interests; and any conduct detrimental to our firm.

Finally, an NEO may forfeit all RSUs if he becomes associated with a “competitive enterprise” during 2012; two-thirds if he becomes associated with a “competitive enterprise” during 2013; and one-third if he becomes associated with a “competitive enterprise” during 2014. See —Compensation Matters—Executive CompensationPotential Payments Upon Termination or Change-in-Control—for further details on the meaning of “cause” and “competitive enterprise.”

Treatment Upon Termination or Change-in-Control. As a general matter, delivery schedules are not accelerated, and transfer restrictions are not removed, when an NEO leaves our firm. The limited exceptions include death and “conflicted employment.” In addition, a change-in-control alone is not sufficient to trigger acceleration of any deliveries or removal of transfer restrictions. See —Compensation Matters—Executive CompensationPotential Payments Upon Termination or Change-in-Control—for further details on the treatment of RSUs and Shares at Risk upon termination of employment or a change-in-control and on the meaning of “conflicted employment.”

Under current law, our U.S. federal corporate tax deduction for compensation paid to certain of our NEOs is limited to $1 million of non-performance-based compensation. Our NEO compensation for 2011 is designed so that variable compensation, including equity-based awards, qualifies as performance-based compensation under Section 162(m) of the Internal Revenue Code.

Qualified Retirement Benefits. Each of our NEOs participates in The Goldman Sachs 401(k) Plan (401(k) Plan), which is our tax-qualified retirement plan available to all of our U.S. employees. In 2011, our NEOs were eligible to make pre-tax, and/or “Roth” after-tax, contributions to our 401(k) Plan and receive a dollar-for-dollar matching contribution from us on the amount they contribute, up to a maximum of $9,800. For 2011, each of our NEOs received a matching contribution of $9,800.

Perquisites and Other Benefits. Our NEOs received in 2011 certain benefits that are considered “perquisites” required to be disclosed as part of their compensation. While our Compensation Committee was provided with the estimated value of these items, it determined, as in prior years, not to give these amounts significant consideration in determining our NEOs’ 2011 variable compensation.

We provide each of our NEOs with a car and driver and other services for security purposes. We also offer our NEOs benefits and tax counseling services, generally provided or arranged by our subsidiary, The Ayco Company, L.P. (Ayco), to assist them with tax and regulatory compliance and to provide them with more time to focus on the needs of our business. Our PMDs, including our NEOs, participate in our executive medical and dental program and receive executive life insurance and long-term disability insurance coverage. Our NEOs also are eligible for a retiree health care program and receive certain other perquisites, some of which have no incremental cost to us. See “All Other Compensation” and footnote (c) in —Executive Compensation—2011 Summary Compensation Table.

Long-Term Performance Incentive Plan

In order to incentivize long-term performance in a manner that does not encourage inappropriate risk-taking, in February 2012, our Compensation Committee granted to each NEO a long-term incentive award. Amounts earned under these awards, if any, are paid in cash; however, our NEOs do not earn any amounts under these awards until the end of the performance period, based on firmwide performance measures and individual performance, as described below. These awards are not considered part of annual compensation.

 

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The initial performance period for the LTIP awards is three years beginning in 2012, and our Compensation Committee may determine, by the end of 2013, to extend the period for up to another five years through the end of 2019. The same measures would continue to apply to such an extension unless the Committee determines otherwise. The award for each NEO has an initial notional value of $3 million that increases and decreases by an amount equal to our ROE for each year during the performance period. (See below for details on how we calculate ROE under the awards.) No amounts are paid until January 2015, or, if the period is extended, the end of the performance period (no later than January 2020). There is no continuing service requirement under the award; however, upon termination of employment for any reason, including retirement, payments are not accelerated and performance measures continue to apply.

Forfeiture and recapture provisions. The LTIP awards are subject to the same forfeiture and recapture provisions as the RSUs and Shares at Risk for the entire performance period. In addition, if our Compensation Committee determines that the payment was based on materially inaccurate financial statements or performance criteria, we may require the NEO to repay to us the value of the award as of the payment date.

Firmwide performance. The initial notional value of the award will be adjusted upward or downward by an amount equal to our “annual ROE” for 2012 and further adjusted as of the end of each subsequent year during the performance period by an amount equal to our “annual ROE” for such year. At the end of the performance period, we calculate our “average ROE” and “average increase in BVPS” over the entire performance period. The adjusted notional value as of the end of the performance period is further adjusted based 50% on average ROE and 50% on average increase in BVPS as set forth in the below table. No amounts are earned based on achieving a certain ROE or BVPS for any one year, and negative returns in any year will offset positive returns during the performance period.

 

Payout*   

Average ROE

Over Performance Period

(Applies to 50% of Notional Value at

End of Performance Period)

    

Average Increase in BVPS

Over Performance Period

(Applies to 50% of Notional Value at

End of Performance Period)

Zero

       <5%             <2%   

50%

       5%             2%   

100%

       10%             7%   

150%

       ³15%             ³12%   

* Payout is scaled if results are between specified percentages.

In determining the above metrics and thresholds, our Compensation Committee reviewed, among other things, our performance in 2011 and over the past four years and information on ROE and change in BVPS for the past four years (individually and as a group) at our firm and at each of our core competitors based on publicly available information, and for 2008-2010 because 2011 information was not publicly available, for Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG and UBS AG. Our Compensation Committee used the same performance thresholds used in the LTIP awards granted in January 2011, despite our weaker performance in 2011, although the initial notional value of those awards was different ($7 million).

Individual performance. Our Compensation Committee may determine in its sole discretion, based on its assessment of an individual NEO’s performance, to adjust the amounts that may be paid out under this award to each NEO. The total amount paid under an award will in no event exceed 150% of the amount that would have been payable following the calculations described above.

For purposes of the calculations above:

“Annual ROE” is computed by dividing net earnings applicable to common shareholders by average monthly common shareholders’ equity. Annual ROE will be adjusted for the after-tax effects of amounts that would be excluded from “Pre-Tax Earnings” under The Goldman Sachs Amended and Restated Restricted Partner Compensation Plan (RPCP), which is a compensation plan in which all of our NEOs participate. See Exhibit 10.2 of our 2011 Annual Report on Form 10-K for a copy of this Plan.

“Average ROE” is the average of the “annual ROE” for each year during the performance period.

“Average Increase in BVPS” is the average of the annual increases in our firm’s book value per common share for each year during the performance period.

 

 

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Our Compensation Committee may determine, in its sole discretion, if particular events or transactions will be included or excluded from the calculation of the performance measures.

GS Gives

We established GS Gives, our donor advised fund, in order to coordinate, facilitate and encourage global philanthropy by our PMDs. Since 2009, we have reduced the amount of compensation available to pay our PMDs and used that amount to make contributions to the fund. We ask our PMDs to provide us with recommendations of not-for-profit organizations that should receive donations from these contributions. These recommendations help to ensure that GS Gives invests in a diverse group of charities that improve the lives of people in communities where we work and live. GS Gives focuses on underserved communities, and we encourage our PMDs to direct grants to organizations consistent with one of four thematic pillars:

 

  Ÿ  

building and stabilizing communities;

 

  Ÿ  

increasing educational opportunities;

 

  Ÿ  

creating jobs and economic growth; and

 

  Ÿ  

honoring service and veterans.

During 2011, GS Gives accepted the recommendations of 381 current and retired PMDs and contributed over $220.4 million to 1,564 non-profit organizations around the world. GS Gives underscores our commitment to philanthropy through diversified and impactful giving at a time when non-profit organizations have a particular need for support. The amounts donated in 2011 by GS Gives based on our NEOs’ recommendations were approximately: Mr. Blankfein – $5.0 million; Mr. Cohn – $4.5 million; Mr. Viniar – $3.7 million; Mr. Evans – $4.4 million; and Mr. Weinberg – $3.7 million.

This year, we reduced the 2011 compensation available for our PMDs, including our NEOs, by $78 million in the aggregate for us to make a charitable contribution to GS Gives.

GS Gives undertakes diligence procedures for each donation and has no obligation to follow recommendations made by our PMDs.

 

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Executive Compensation

The 2011 Summary Compensation Table below sets forth compensation information for our NEOs relating to fiscal 2011, fiscal 2010 and fiscal 2009, as applicable. For a discussion of 2011 NEO compensation, please read —Compensation Discussion and Analysis —above.

Pursuant to SEC rules, the 2011 Summary Compensation Table is required to include for a particular fiscal year only those RSUs granted during that year, rather than awards granted after year-end, even if awarded for services in that year. SEC rules require disclosure of cash variable compensation to be included in the year earned, even if payment is made after year-end.

Generally, we grant equity-based awards and pay any cash variable compensation for a particular year shortly after that year-end. As a result, equity-based awards and cash variable compensation are disclosed in each row of the table as follows:

 

 

  Ÿ  

2011

 

  “Bonus” is cash variable compensation for 2011
  “Stock Awards” are RSUs awarded for 2010
  RSUs awarded for 2011 are not included because they were granted in February 2012 (See —Compensation Discussion and Analysis —above for a discussion of these equity-based awards.)

 

  Ÿ  

2010

 

  “Bonus” is cash variable compensation for 2010
  “Stock Awards” are RSUs awarded for 2009

 

  Ÿ  

2009

 

  “Bonus” is zero because our NEOs did not receive any cash variable compensation for 2009
  “Stock Awards” is zero because there were no equity-based awards for our NEOs for 2008

 

 

2011 Summary Compensation Table

 

Name and
Principal

Position

  Year     Salary     Bonus    

Stock

Awards (a)

   

Option

Awards (b)

    Change
in
Pension
Value
    All Other
Compensation (c)
    Total  

Lloyd C. Blankfein

Chairman and CEO

    2011      $   2,000,000      $   3,000,000      $   10,710,073      $   0      $   4,776      $ 449,556      $ 16,164,405   
    2010      $ 600,000      $ 5,400,000      $ 7,650,013      $ 0      $ 2,343      $ 464,067      $ 14,116,423   
      2009      $ 600,000      $ 0      $ 0      $ 0      $      $ 425,814      $ 1,025,814   

Gary D. Cohn

President and COO

    2011      $ 1,850,000      $ 3,000,000      $ 10,710,073      $ 0      $ 1,145      $ 242,674      $ 15,803,892   
    2010      $ 600,000      $ 5,400,000      $ 7,650,013      $ 0      $ 501      $ 212,913      $ 13,863,427   
      2009      $ 600,000      $ 0      $ 0      $ 0      $      $ 324,572      $ 924,572   

David A. Viniar

CFO

    2011      $ 1,850,000      $ 3,000,000      $ 10,710,073      $ 0      $ 9,656      $ 243,325      $ 15,813,054   
    2010      $ 600,000      $ 5,400,000      $ 7,650,013      $ 0      $ 4,652      $ 303,346      $ 13,958,011   
      2009      $ 600,000      $ 0      $ 0      $ 0      $      $ 345,978      $ 945,978   

J. Michael Evans

Vice Chairman

    2011      $ 1,850,000      $ 3,000,000      $ 10,710,073      $ 0      $ 716      $ 185,525      $ 15,746,314   
    2010      $ 600,000      $ 5,400,000      $ 7,650,013      $ 0      $ 330      $ 277,165      $ 13,927,508   
      2009      $ 600,000      $ 0      $ 0      $ 0      $      $   1,024,448      $ 1,624,448   

John S. Weinberg

Vice Chairman

    2011      $ 1,850,000      $ 3,000,000      $ 10,710,073      $ 0      $ 4,743      $ 188,348      $   15,753,164   
    2010      $ 600,000      $ 5,400,000      $ 7,650,013      $ 0      $ 2,211      $ 158,511      $ 13,810,735   
      2009      $ 600,000      $ 0      $ 0      $ 0      $      $ 132,540      $ 732,540   

 

 

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(a) Amounts included for fiscal 2011 represent the grant date fair value of RSUs granted on January 26, 2011 for services in fiscal 2010 (2010 Year-End RSUs), in accordance with Financial Accounting Standards Board’s Accounting Standards Codification 718 Compensation – Stock Compensation (ASC 718). Grant date fair value for 2010 Year-End RSUs is determined based on the closing price-per-share of our Common Stock on the NYSE on the date of grant ($161.31) and includes a 15% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2010 Year-End RSUs. Amounts included for fiscal 2010 represent the grant date fair value of RSUs granted on February 5, 2010 for services in fiscal 2009 (2009 Year-End RSUs), in accordance with ASC 718. Grant date fair value for 2009 Year-End RSUs is determined based on the closing price-per-share of Common Stock on the NYSE on the date of grant ($154.16) and includes a 15% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2009 Year-End RSUs. No stock awards were granted to our NEOs during fiscal 2009.

 

(b) No options to purchase Common Stock (Options) were granted to our NEOs during fiscal 2011, 2010 or 2009.

 

(c) The charts and narrative below describe the benefits and perquisites for fiscal 2011 contained in the “All Other Compensation” column above.

 

Name    401(k)
Matching
Contribution
     Term Life
Insurance
Premium
     Executive
Medical and
Dental Plan
Premium
Payments
     Long-Term
Disability
Insurance
Premium
     Executive Life
Premium
     Benefits
and Tax
Counseling
Services*
     Car**  

Mr. Blankfein

     $  9,800         $  113         $  61,068        $  821         $  18,758         $  47,731         $  51,467   

Mr. Cohn

     $  9,800         $  113         $  61,068        $  821         $  11,692         $  76,750         $  59,226   

Mr. Viniar

     $  9,800         $  113         $  61,068        $  821         $  17,955         $  58,615         $  90,087   

Mr. Evans

     $  9,800         $  113         $  61,068        $  821         $  13,202         $  50,988         $  44,153   

Mr. Weinberg

     $  9,800         $  113         $  61,068        $  821         $  13,761         $  55,705         $  45,200   

 

  * Amounts reflect the incremental cost to us of benefits and tax counseling services provided by Ayco or by another third-party provider. For services provided by Ayco, cost is determined based on the number of hours of service provided by, and compensation paid to, individual service providers. For services provided by others, amounts are payments made by us to such providers.

 

  ** Amounts reflect the incremental cost to us attributable to commuting and other non-business use. We provide each of our NEOs with a car and driver for security purposes. The cost of providing a car is determined on an annual basis and includes, as applicable, driver compensation, annual car lease, car rental or car service fees and insurance cost as well as miscellaneous expenses (for example, fuel and car maintenance).

Also included in the “All Other Compensation” column are other amounts reflecting the incremental cost to us of providing our identity theft safeguards program for U.S. PMDs, in-office meals and security services. We provide security (the incremental cost of which was, in the case of Mr. Blankfein, $258,701) for the benefit of our firm and our shareholders and believe it is required in light of the elevated threat profile in the current environment. We do not consider these security measures to be personal benefits, but rather business-related necessities due to the high-profile standing of our NEOs as our executives.

We provide to our NEOs, on the same terms as are provided to other PMDs and at no incremental out-of-pocket cost to our firm, waived or reduced fees and overrides in connection with investments in certain funds managed or sponsored by Goldman Sachs, unused tickets to certain events and certain negotiated discounts with third-party vendors.

We make available to our NEOs for business use private aircraft from third-party vendors. Our policy is not to permit personal use of such aircraft by our NEOs except in connection with business trips where the NEO pays the firm for any additional costs. In situations where an NEO brings a personal guest as a passenger on a business-related flight, the NEO pays us an amount equal to the greater of: (a) the aggregate incremental cost to us of the usage by such guest; and (b) the price of a first-class commercial airline ticket for the same trip.

 

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2011 Grants of Plan-Based Awards

 

The awards included in this table are 2010 Year-End RSUs and LTIP awards granted in January 2011.

The following table sets forth plan-based awards granted in early 2011. In accordance with SEC rules, the table does not include awards that were granted in 2012. See —Compensation Discussion and Analysis —above for a discussion of those awards.

 

Name    Grant
Date
                      All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (c)
     All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
   Exercise
or Base
Price of
Option
Awards
($/Sh)
   Grant Date
Fair Value
of Stock
and Option
Awards (d)
 
                       
                               
     

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards (a)

           
      Threshold
($)
   Target
($)
     Maximum
($) (b)
           

Lloyd C. Blankfein

     1/26/2011         —                 78,111             $ 10,710,073   
       1/26/2011       $  0    $ 7,000,000                            

Gary D. Cohn

     1/26/2011         —                 78,111             $ 10,710,073   
       1/26/2011       $  0    $   7,000,000                            

David A. Viniar

     1/26/2011         —                 78,111             $   10,710,073   
       1/26/2011       $  0    $ 7,000,000                            

J. Michael Evans

     1/26/2011         —                 78,111             $ 10,710,073   
       1/26/2011       $  0    $ 7,000,000                            

John S. Weinberg

     1/26/2011         —                 78,111             $ 10,710,073   
       1/26/2011       $  0    $ 7,000,000                            

 

(a) Consists of cash awards made under our LTIP that are earned only after a minimum of three years based on firmwide performance measures and individual performance. The initial performance period is three years beginning with 2011, and our Compensation Committee may determine, by the end of 2012, to extend the period for up to another five years through the end of 2018. The initial notional value of these awards will be adjusted upward or downward by an amount equal to our “annual ROE” (as defined below) for each year of the performance period. At the end of the performance period, we calculate our “average ROE” and “average increase in BVPS” (each as defined below) over the entire performance period. The adjusted notional value as of the end of the performance period is further adjusted based 50% on average ROE and 50% on average increase in BVPS as set forth in the below table. No amounts are earned based on achieving a certain ROE or BVPS for any one year, and negative returns in any year will offset positive returns during the performance period.

 

Payout*   

Average ROE

Over Performance Period

(Applies to 50% of Notional Value at

End of Performance Period)

    

Average Increase in BVPS

Over Performance Period

(Applies to 50% of Notional Value at

End of Performance Period)

 

Zero

     <5%         <2%   

50%

       5%           2%   

100%

     10%           7%   

150%

     ³15%         ³12%   

 

* Payout is scaled if results are between specified percentages.

 

     In addition, our Compensation Committee may determine in its sole discretion, based on its assessment of an individual NEO’s performance, to adjust the amounts that may be paid out under the award to each NEO. Our Compensation Committee may determine based on an NEO’s individual performance that no amount is payable under the award. The total amount paid under an award will in no event exceed 150% of the amount that would have been payable following the calculations described above.

 

     “Annual ROE” is computed by dividing net earnings applicable to common shareholders by average monthly common shareholders’ equity. Annual ROE will be adjusted for the after-tax effects of amounts that would be excluded from “Pre-Tax Earnings” under The Goldman Sachs Amended and Restated Restricted Partner Compensation Plan (RPCP), which is a compensation plan in which all of our NEOs participate. See Exhibit 10.2 of our 2011 Annual Report on Form 10-K for a copy of this Plan.

 

     “Average ROE” is the average of the “annual ROE” for each year during the performance period.

 

     “Average Increase in BVPS” is the average of the annual increases in our firm’s book value per common share for each year during the performance period.

 

     Our Compensation Committee may determine, in its sole discretion, if particular events or transactions will be included or excluded from the calculation of the performance measures; pursuant to the terms of the LTIP awards granted in 2011, the redemption of our Series G Preferred Stock (as described in Certain Relationships and Related Transactions), will be treated as if it occurred prior to the start of the performance period.

 

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(b) As noted in (a) above, because these awards are adjusted each year over the performance period by an amount equal to our “annual ROE” (which is uncapped), no maximum award amount is determinable pursuant to the terms of these awards.

 

(c) Consists of 2010 Year-End RSUs. See —2011 Non-Qualified Deferred Compensation —and —Potential Payments Upon Termination or Change-in-Control —below for additional information on the 2010 Year-End RSUs.

 

(d) In accordance with ASC 718, determined based on the closing price-per-share of our Common Stock on the NYSE on the date of grant ($161.31) and includes a 15% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2010 Year-End RSUs.

2011 Outstanding Equity Awards at Fiscal Year-End

 

No Options have been granted to our NEOs since December 2007.

The following table sets forth outstanding unexercised Options held by each NEO as of December 31, 2011.

 

     Option Awards           Stock Awards  
Name    Option
Award
Year
     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable (a)
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
     Option
Exercise
Price ($)
     Option
Expiration
Date
           Number of
Shares or
Units of
Stock
That Have Not
Vested (#)
     Market Value
of Shares or
Units of
Stock That
Have Not
Vested ($)
 

Lloyd C. Blankfein

     2007         322,104               $   204.16         11/24/2017                      $  —   
     2006         209,228               $ 199.84         11/25/2016                          
     2005         218,872               $ 131.64         11/27/2015                          
       2002         137,670               $ 78.87         11/30/2012                          

Gary D. Cohn

     2007         317,400               $ 204.16         11/24/2017                      $  —   
     2006         205,228               $ 199.84         11/25/2016                          
     2005         253,816               $ 131.64         11/27/2015                          
       2002         130,425               $ 78.87         11/30/2012                          

David A. Viniar

     2007         270,380               $ 204.16         11/24/2017                      $  —   
     2006         153,184               $ 199.84         11/25/2016                          
     2005         135,312               $ 131.64         11/27/2015                          
       2002         50,751               $ 78.87         11/30/2012                          

J. Michael Evans

     2007         271,416               $ 204.16         11/24/2017                      $  —   
     2006         201,224               $ 199.84         11/25/2016                          
     2005         171,772               $ 131.64         11/27/2015                          
       2002         60,408               $ 78.87         11/30/2012                          

John S. Weinberg

     2007         149,944               $ 204.16         11/24/2017                      $  —   
     2006         121,160               $ 199.84         11/25/2016                          
     2005         117,080               $ 131.64         11/27/2015                          
       2002         41,094               $ 78.87         11/30/2012                          

 

(a) Shares received on exercise of Options granted on December 19, 2007 for services in fiscal 2007 will not be transferable until January 2013. See —Potential Payments Upon Termination or Change-in-Control —below for details on treatment of the Options upon termination of employment.

 

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2011 Option Exercises and Stock Vested

The awards included in this table are 2010 Year-End RSUs. No Options were exercised in 2011.

 

    Option Awards           Stock Awards  
Name  

Number of
Shares
Acquired on
Exercise (#)

     Value
Realized on
Exercise ($)
          

Number of

Shares
Acquired on
Vesting (#) (a)

   

Value

Realized on
Vesting ($) (b)

 

Lloyd C. Blankfein

                $  —              78,111            $12,600,085   

Gary D. Cohn

                $  —              78,111            $12,600,085   

David A. Viniar

                $  —              78,111            $12,600,085   

J. Michael Evans

                $  —              78,111            $12,600,085   

John S. Weinberg

                $  —              78,111            $12,600,085   

 

(a) Includes shares of Common Stock underlying 2010 Year-End RSUs, which were vested upon grant. One-third of these shares were delivered in January 2012, and one-third are deliverable in each of January 2013 and 2014. Substantially all of the shares of Common Stock underlying the 2010 Year-End RSUs that are delivered to our NEOs are subject to transfer restrictions until January 2016.

 

(b) Values were determined by multiplying the aggregate number of RSUs by $161.31, the closing price-per-share of our Common Stock on the NYSE on January 26, 2011, the grant date. In accordance with SEC rules the—2011 Summary Compensation Table and—2011 Grants of Plan-Based Awards —above include the grant date fair value of the 2010 Year-End RSUs, which includes a 15% liquidity discount to reflect the transfer restrictions on these awards.

2011 Pension Benefits

The following table sets forth pension benefit information as of December 31, 2011. The Goldman Sachs Employees’ Pension Plan (GS Pension Plan) was frozen November 27, 2004. No NEO has participated in our GS Pension Plan since November 30, 1995.

 

Name    Plan Name      Number of Years
Credited Service (#) (a)
     Present Value of
Accumulated
Benefit ($) (b)
    Payments During
Last Fiscal Year ($)
 

Lloyd C. Blankfein

     GS Pension Plan         3         $30,002          

Gary D. Cohn

     GS Pension Plan         1         $  5,883          

David A. Viniar

     GS Pension Plan         6         $58,757          

J. Michael Evans

     GS Pension Plan         1         $  4,048          

John S. Weinberg

     GS Pension Plan         3         $27,268          

 

(a) Our U.S. employees, including each NEO, were credited for service for each year employed by us while eligible to participate in our GS Pension Plan.

 

(b) Represents the present value of the entire accumulated benefit and not the annual payment an NEO would receive in retirement. Prior to being frozen, our GS Pension Plan provided an annual benefit equal to between 1% and 2% of the first $75,000 of the participant’s compensation for each year of credited service under our GS Pension Plan. The normal form of payment is a single life annuity for single participants and an actuarially equivalent 50% joint and survivor annuity for married participants. The present values shown in this column were determined using the following assumptions: payment of a single life annuity following retirement at normal retirement age (age 65); a 4.75% discount rate; and mortality estimates based on the RP-2000 white collar fully generational mortality table, with adjustments to reflect continued improvements in mortality. Our GS Pension Plan provides for early retirement benefits in some cases, and all of our NEOs are eligible for such early retirement benefits.

For a description of our 401(k) Plan, our tax-qualified defined contribution plan, see —Compensation Discussion and Analysis—Additional Details on our NEOs’ 2011 Compensation—Qualified Retirement Benefits —above.

 

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2011 Non-Qualified Deferred Compensation

The following table sets forth information for each NEO, as applicable, with respect to (i) vested RSUs granted for services in prior years and for which the underlying shares of Common Stock had not yet been delivered as of the beginning of 2011 and (ii) our Non-Qualified Deferred Compensation Plan (NQDC Plan), which was terminated in December 2008.

The “Vested and Undelivered RSUs” generally were awarded for services in fiscal 2010, fiscal 2009 and fiscal 2007. RSUs generally are not transferable.

 

  Ÿ  

Amounts shown as “Registrant Contributions” represent the 2010 Year-End RSUs, which were vested at grant;

 

  Ÿ  

Amounts shown as “Aggregate Earnings” reflect the change in market value of the shares of Common Stock underlying vested but undelivered RSUs, as well as dividend equivalents earned and paid, during fiscal 2011; and

 

  Ÿ  

Amounts shown as “Aggregate Withdrawals/Distributions” reflect the value of shares of Common Stock underlying RSUs that were delivered, as well as dividend equivalents paid, during fiscal 2011.

Prior to termination of our NQDC Plan, each participant was permitted to elect to defer up to $1 million of his or her year-end cash variable compensation for up to the later of (i) 10 years or (ii) six months after termination of employment. Amounts deferred under our NQDC Plan generally are not forfeitable and were adjusted based on the performance of certain available “notional investments” selected by each participant. Distributions from our NQDC Plan to each of our NEOs will be made in lump sum cash payments and will commence no earlier than 2016. Our NEOs are not subject to U.S. federal income tax on amounts that they deferred or on any “notional investment” earnings until those amounts are distributed to them, and we do not take a tax deduction on these amounts until they are distributed. For accounting purposes, we recognized as a compensation expense the amounts deferred under these plans in the year in which they were deferred.

 

Name   Plan or Award   Executive
Contributions
in Last Fiscal
Year
   

Registrant
Contributions
in Last Fiscal

Year (a)

   

    Aggregate
Earnings

in Last
Fiscal

Year (b)

   

Aggregate
Withdrawals/
Distributions

in Last Fiscal

Year (c)

    Aggregate
Balance at
Fiscal Year
End (d)
 

Lloyd C. Blankfein

  Vested and Undelivered RSUs          $ 12,600,085     $ (9,234,770   $ 22,096,099     $ 10,583,204   
    NQDC Plan                 $ (13,723          $ 1,265,633(e)(f)   

Gary D. Cohn

  Vested and Undelivered RSUs          $ 12,600,085     $ (9,224,604   $ 21,829,642     $ 10,583,204   
    NQDC Plan                 $ 18,919             $ 2,620,648(f)(g)   

David A. Viniar

  Vested and Undelivered RSUs          $ 12,600,085     $ (9,122,956   $ 19,165,395     $ 10,583,204   
    NQDC Plan                 $ (147,549          $ 1,664,290(f)(g)   

J. Michael Evans

  Vested and Undelivered RSUs          $ 12,600,085     $ (8,577,070   $ 4,857,539     $ 10,583,204   
    NQDC Plan                                   

John S. Weinberg

  Vested and Undelivered RSUs          $ 12,600,085     $ (8,862,592   $ 12,341,177     $ 10,583,204   
    NQDC Plan                 $ (226,243          $ 2,409,539(f)   

 

(a) Registrant contributions represent the market value of the underlying Common Stock upon grant of 2010 Year-End RSUs. In accordance with SEC rules, the—2011 Summary Compensation Table and—2011 Grants of Plan-Based Awards —above include the grant date fair value of the 2010 Year-End RSUs, which includes a 15% liquidity discount to reflect the transfer restrictions on these awards. The market values were determined by multiplying the aggregate number of RSUs by $161.31, the closing price-per-share of our Common Stock on the NYSE on January 26, 2011, the grant date.

 

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(b) Aggregate earnings with respect to vested and undelivered RSUs include changes in the market value of the shares of Common Stock underlying vested but undelivered RSUs. In addition, each RSU includes a dividend equivalent right, pursuant to which the holder is entitled to receive an amount equal to any ordinary cash dividends paid to the holder of a share of Common Stock approximately when those dividends are paid to shareholders. Amounts earned and paid on vested but undelivered RSUs during fiscal 2011 pursuant to dividend equivalent rights also are included. The vested and undelivered RSUs included in these amounts and their delivery dates are as follows:

 

Vested and Undelivered RSUs         Delivery

2010 Year-End RSUs

     

One-third delivered in January 2012; one-third deliverable in

each of January 2013 and 2014

2009 Year-End RSUs

      One-third delivered in each of January 2011 and 2012; one-third deliverable in January 2013

2007 Year-End RSUs

      Delivered (January 2011)

2007 Discount RSUs

      Delivered (January 2011)

 

     Delivery of shares of Common Stock underlying RSUs may be accelerated in certain limited circumstances (for example, in the event that the holder of the RSU dies or leaves us to accept a governmental position where retention of the RSU would create a conflict of interest). See —Potential Payments Upon Termination or Change-in-Control —below for treatment of the RSUs upon termination of employment.

 

     With respect to our NQDC Plan, NEO account balances under our NQDC Plan were adjusted to reflect gains (or losses) based on the performance of certain “notional investments” (selected by each participant from various hedge funds and mutual funds available under the plan in 2011) to the same extent as if the NEO had actually invested in those funds.

 

(c) Includes shares of Common Stock that were delivered on January 25, 2011 under the following awards: one-third of 2009 Year-End RSUs granted on February 5, 2010, RSUs granted on December 19, 2007 for services in fiscal 2007 (2007 Year-End RSUs) and Discount RSUs granted under our Discount Stock Program on December 19, 2007 (2007 Discount RSUs). In the case of Mr. Evans, does not include the portion of his 2007 annual compensation that was granted as restricted stock. Values were determined by multiplying the aggregate number of RSUs by $161.98, the closing price-per-share of our Common Stock on the NYSE on the delivery date. Amounts paid on vested but undelivered RSUs during 2011 pursuant to dividend equivalent rights also are included.

 

(d) The vested and undelivered RSUs included in these amounts are 2010 Year-End RSUs and 2009 Year-End RSUs. These stock awards were previously reported in the Summary Compensation Table for the applicable years. Values for RSUs were determined by multiplying the number of RSUs by $90.43, the closing price-per-share of our Common Stock on the NYSE on December 30, 2011.

 

(e) This amount also reflects a deferral of compensation of $1,000,000 previously reported as bonus in the fiscal 2005 Summary Compensation Table for participating executives who were NEOs in fiscal 2005.

 

(f) This amount also reflects a deferral of compensation of $1,000,000 previously reported as bonus in the fiscal 2006 Summary Compensation Table for participating executives who were NEOs in fiscal 2006.

 

(g) This amount also reflects a deferral of compensation of $1,000,000 previously reported as bonus in the fiscal 2007 Summary Compensation Table for participating executives who were NEOs in fiscal 2007.

Potential Payments Upon Termination or Change-in-Control

 

Our NEOs do not have employment agreements that provide for severance or “golden parachute” payments.

Our RPCP, The Goldman Sachs Amended and Restated Stock Incentive Plan (SIP) and our retiree health care program may provide for potential payments to our NEOs in conjunction with a termination of employment. The amounts potentially payable to our NEOs under our pension plans, vested RSUs and our NQDC Plan are set forth under —2011 Pension Benefits and —2011 Non-Qualified Deferred Compensation —above. The terms of the LTIP awards granted in January 2011 are not affected by a termination of employment or change-in-control, except that, following a change-in-control, our Compensation Committee may not amend the terms of the awards with respect to an NEO without such NEO’s consent.

Each of our NEOs participates in our RPCP. Under our RPCP, if a participant’s employment at Goldman Sachs terminates for any reason before the end of a “contract period” (generally a one-year period as defined in the RPCP), our Compensation Committee has the discretion to determine what, if any, variable compensation shall be provided to the participant for services provided in that year. There is no severance provided under our RPCP.

 

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Set forth below is a calculation of the potential benefits to each of our NEOs assuming a termination of employment occurred on December 31, 2011. The narrative disclosure that follows the table provides important information and definitions regarding specific payment terms and conditions.

 

Termination Reason   Name    Value of
Unvested
RSUs that Vest
Upon
Termination
     Present
Value of
Premiums
for Retiree
Health Care
Program (e)
    Total  

Cause or Termination with Violation (a)

  Lloyd C. Blankfein      $  0       $ 0      $ 0   
  Gary D. Cohn      $  0       $ 0      $ 0   
  David A. Viniar      $  0       $ 0      $ 0   
  J. Michael Evans      $  0       $ 0      $ 0   
    John S. Weinberg      $  0       $ 0      $ 0   
Termination without Violation (a), Death (b), Change-in-Control, Disability or Conflicted Employment (c) or Downsizing (d)   Lloyd C. Blankfein      $  0       $ 773,628      $ 773,628   
  Gary D. Cohn      $  0       $ 1,081,095      $ 1,081,095   
  David A. Viniar      $  0       $ 790,355      $ 790,355   
  J. Michael Evans      $  0       $ 1,210,017      $ 1,210,017   
    John S. Weinberg      $  0       $ 989,899      $ 989,899   

 

(a) Except as discussed below, upon an NEO’s termination without Violation (as defined below), shares of Common Stock underlying RSUs (including restricted stock) will continue to be delivered on schedule, and Options will remain exercisable for their full term, provided that, for 2010 Year-End RSUs and 2009 Year-End RSUs, the NEO does not become associated with a Competitive Enterprise (as defined below). In such case, the NEO will forfeit his benefits under our retiree health care program and, for 2010 Year-End RSUs, the NEO generally would have forfeited all of these awards if the association occurred in 2011; will forfeit two-thirds of these awards if the association occurs in 2012; and will forfeit one-third of these awards if association occurs in 2013. For 2009 Year-End RSUs, the NEO generally would have forfeited two-thirds of these awards if the association occurred in 2011 and will forfeit one-third of these awards if association occurs in 2012. This non-competition condition may be removed upon a termination of employment that is characterized by us as “involuntary” or by “mutual agreement” if the individual executes an appropriate general waiver and release of claims and an agreement to pay any associated tax liability.

 

     The occurrence of a Violation, including any event constituting Cause (as defined below) or the Solicitation (as defined below) of employees or clients of our firm, by an NEO prior to delivery (in the case of RSUs) or prior to exercise (in the case of Options) will result in forfeiture of all RSUs and Options, and in some cases may result in the NEO having to repay amounts previously received. In the event of certain Violations (for example, NEO engaging in Cause) following delivery of shares of Common Stock underlying RSUs but prior to the lapse of transfer restrictions, such shares may also be recaptured.

 

     RSU awards are also subject to additional risk-related forfeiture and recapture provisions included in the definition of Violations below. As a result of these provisions, for example, an NEO will forfeit all of his 2010 Year-End RSUs and 2009 Year-End RSUs, and any shares of Common Stock delivered under such RSUs may be recaptured, if our Compensation Committee determines that his failure to properly consider risk in 2010 (with respect to 2010 Year-End RSUs) or 2009 (with respect to 2009 Year-End RSUs) has, or reasonably could be expected to have, a material adverse impact on his business unit, the firm or the broader financial system.

 

(b) In the event of an NEO’s death, delivery of shares of Common Stock underlying RSUs is accelerated and Options remain exercisable for their full term. Any transfer restrictions on the shares of Common Stock underlying RSUs and shares from Option exercises are removed. For information on the number of vested RSUs and unexercised Options held by the NEOs at fiscal year-end, see —2011 Outstanding Equity Awards at Fiscal Year-End and —2011 Non-Qualified Deferred Compensation —above. These amounts do not reflect, in the case of death, the payment of a death benefit under our executive life insurance plan, which provides each NEO $4.5 million of term life insurance coverage through age 75.

 

(c) If a Change-in-Control (as defined below) occurs, and within 18 months thereafter we terminate an NEO’s employment without Cause or if the NEO terminates his employment for Good Reason (as defined below): (i) delivery of shares of Common Stock underlying RSUs is accelerated; and (ii) Options remain exercisable for their full term. In addition, any transfer restrictions on the shares of Common Stock underlying RSUs and shares from Option exercises are removed.

 

     In the case of a disability, Options remain exercisable for their full term and, provided that the NEO does not become associated with a Competitive Enterprise, shares of Common Stock underlying RSUs continue to deliver on schedule. In such case, for 2010 Year-End RSUs, the NEO generally would have forfeited all of these awards if the association occurred in 2011; will forfeit two-thirds of these awards if the association occurs in 2012; and will forfeit one-third of these awards if association occurs in 2013. For 2009 Year-End RSUs, the NEO generally would have forfeited two-thirds of these awards if the association occurred in 2011 and will forfeit one-third of these awards if association occurs in 2012.

 

     In the case of a termination in which an NEO resigns and accepts a position that is deemed Conflicted Employment (as defined below), the NEO will receive, at our sole discretion, (i) with respect to RSUs, either a cash payment or an accelerated delivery of, and removal of transfer restrictions on, the shares of Common Stock underlying such RSUs; and (ii) with respect to Options, one of the following: (x) a cash payment (in respect of cancellation of such Options) equal to the fair market value of the shares underlying the vested Options over the exercise price of such Options, (y) acceleration of the exercisability of such Options and removal of all transfer restrictions on the underlying shares of Common Stock or (z) permission for the participant to transfer such vested Options to another party for value.

 

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(d) In the event of a termination due to Downsizing (as described below), shares of Common Stock underlying RSUs deliver on schedule and Options remain exercisable for their full term.

 

(e) All PMDs with eight or more years of service as a PMD are eligible to receive medical and dental coverage under our retiree health care program for themselves and eligible dependents through the firm at a 75% subsidy. All of our NEOs are eligible for this coverage. The values shown in this column reflect the present value of the cost to us of the 75% subsidy and were determined using the following assumptions: a 4.75% discount rate; mortality estimates based on the RP-2000 white collar fully generational mortality table, with adjustments to reflect continued improvements in mortality; estimates of future increases in healthcare costs of 7.6% (for pre-65 medical and pharmacy) and 8.2% (for post-65 medical and pharmacy) (ultimate medical and pharmacy inflation of 5.25%), and 5.25% for dental; and assumptions for subsequent eligibility for alternative pre-65 coverage, which would limit or eliminate coverage under our program (35% primary, 35% secondary and 30% no coverage).

As PMDs, our NEOs generally are subject to a policy of 90 days’ notice of termination of employment. We may require (or we may waive the requirement) that a NEO be inactive (i.e., on “garden leave”) during the notice period.

For purposes of describing our RSUs and Options, the above-referenced terms have the following meanings:

“Cause” means a participant in our SIP (a) is convicted in a criminal proceeding on certain misdemeanor charges, on a felony charge or on an equivalent charge, (b) engages in employment disqualification conduct under applicable law, (c) willfully fails to perform his or her duties to Goldman Sachs, (d) violates any securities or commodities laws, rules or regulations or the rules and regulations of any relevant exchange or association of which we are a member, (e) violates any of our policies concerning hedging or pledging or confidential or proprietary information, or materially violates any other of our policies, (f) impairs, impugns, denigrates, disparages or negatively reflects upon our name, reputation or business interests or (g) engages in conduct detrimental to us.

“Change-in-Control” means the consummation of a business combination involving Goldman Sachs, unless immediately following the business combination either:

 

  Ÿ  

at least 50% of the total voting power of the surviving entity or its parent entity, if applicable, is represented by securities of Goldman Sachs that were outstanding immediately prior to the transaction (or by shares into which the securities of Goldman Sachs are converted in the transaction); or

 

  Ÿ  

at least 50% of the members of the board of directors of the surviving entity, or its parent entity, if applicable, following the transaction were, at the time of our Board’s approval of the execution of the initial agreement providing for the transaction, directors of Goldman Sachs on the date of grant of the RSUs and Options (including directors whose election or nomination was approved by two-thirds of the incumbent directors).

“Competitive Enterprise” means a business enterprise that (a) engages in any activity, (b) owns or controls a significant interest in or (c) is owned by, or a significant interest in which is owned or controlled by, any entity that engages in any activity, that, in any case, competes anywhere with any activity in which we are engaged.

“Conflicted Employment” occurs where (a) a participant resigns solely to accept employment at any U.S. federal, state or local government, any non-U.S. government, any supranational or international organization, any self-regulatory organization, or any agency or instrumentality of any such government or organization, or any other employer determined by our Compensation Committee, and as a result of such employment the participant’s continued holding of our equity-based awards would result in an actual or perceived conflict of interest, or (b) a participant terminates employment and then notifies us that he/she has accepted or intends to accept Conflicted Employment.

Whether employment is terminated by reason of “Downsizing” is determined solely by us.

Good Reason” means (a) as determined by our Compensation Committee, a materially adverse change in the participant’s position or nature or status of the participant’s responsibilities from those in effect immediately before the Change-in-Control or (b) Goldman Sachs requiring the participant’s principal place of employment to be located more than 75 miles from the location where the participant is principally employed at the time of the Change-in-Control (except for required travel consistent with the participant’s business travel obligations in the ordinary course prior to the Change-in-Control).

“Solicitation” means any direct or indirect communication of any kind whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner, to take or refrain from taking any action.

“Violation” includes any of the following:

 

  Ÿ  

Engaging in materially improper risk analysis or failing to sufficiently raise concerns about risks during the year for which the award was granted;

 

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  Ÿ  

Soliciting our clients or prospective clients to transact business with one of our competitors or to refrain from doing business with us, or interfering with any of our client relationships;

 

  Ÿ  

Failing to perform obligations under any agreement with us;

 

  Ÿ  

Bringing an action that results in a determination that the terms or conditions for the exercise of Options or the delivery of shares of Common Stock underlying RSUs are invalid;

 

  Ÿ  

Attempting to have a dispute under our SIP or the applicable award agreement resolved in a manner other than as provided for in our SIP or the applicable award agreement;

 

  Ÿ  

Any event constituting Cause;

 

  Ÿ  

Failing to certify compliance to us or otherwise failing to comply with the terms of our SIP or the applicable award agreement;

 

  Ÿ  

Upon the termination of employment for any reason, receiving grants of cash, equity or other property (whether vested or unvested) from an entity to which the participant provides services, to replace, substitute for or otherwise in respect of Options or RSUs;

 

  Ÿ  

Hiring of, or entering into a partnership or similar arrangement with, any of our employees with whom the participant worked while employed by us or who, at any time during the year immediately preceding the participant’s termination of employment with us, worked in the same division as the participant or who is a Managing Director (Selected Firm Personnel) by a competitor of ours that the participant controls or otherwise forms or is a partner or has similar status, or that bears the participant’s name, or where the participant will have responsibility over such Selected Firm Personnel, or hiring or identifying for potential hiring (or participating in any such activity) Selected Firm Personnel whether on behalf of the participant, a competitor of ours or any other person;

 

  Ÿ  

Soliciting any of our employees to resign or to accept employment with a competitor; or

 

  Ÿ  

With respect to 2010 Year-End RSUs, the firm failing to maintain our minimum tier 1 capital ratio (as defined in the Federal Reserve regulations) for 90 consecutive business days or the Federal Reserve Board or Federal Deposit Insurance Corporation (FDIC) makes a written recommendation for the appointment of the FDIC as a receiver based on a determination that we are “in default” or “in danger of default.”

Report of our Compensation Committee

Our Compensation Committee reviewed the Compensation Discussion and Analysis (CD&A), as prepared by management of Goldman Sachs, and discussed the CD&A with management of Goldman Sachs. Semler Brossy and the CRO also reviewed the CD&A. Based on the Committee’s review and discussions, the Committee recommended to the Board that the CD&A be included in this Proxy Statement.

Compensation Committee:

James A. Johnson, Chair

John H. Bryan

M. Michele Burns

Claes Dahlbäck

Stephen Friedman

William W. George

Lois D. Juliber

Lakshmi N. Mittal

James J. Schiro

Debora L. Spar

 

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Item 2. An Advisory Vote to Approve Executive Compensation (Say on Pay)

 

Our Board Unanimously Recommends a Vote FOR the Resolution Approving the Executive Compensation of our NEOs.

Our Board recognizes the fundamental interest our shareholders have in executive compensation. Our say on pay vote gives our shareholders the opportunity to cast an advisory vote to approve the compensation of our NEOs. We will include this advisory vote on an annual basis at least until the next advisory vote on the frequency of say on pay votes (no later than our 2017 Annual Meeting of Shareholders).

Prior Say on Pay Vote and Shareholder Engagement

At our 2011 Annual Meeting of Shareholders, our advisory vote to approve executive compensation received the support of a majority of our shareholders (approximately 73% of votes cast). We believe this is an endorsement of:

 

  Ÿ  

our pay-for-performance philosophy;

 

  Ÿ  

the significant portion (70%) of 2010 annual variable compensation in RSUs;

 

  Ÿ  

the five-year transfer restrictions applicable to our equity-based awards;

 

  Ÿ  

the forfeiture and recapture, or “clawback,” provisions in our equity-based awards;

 

  Ÿ  

our retention requirements; and

 

  Ÿ  

our strong focus on risk management.

Our Compensation Committee views a continuing, constructive dialogue with our shareholders on these matters as important. To this end, we engaged with many of our shareholders in advance of and following our 2011 Annual Meeting of Shareholders in order to gain further insight and understanding into their views on our executive compensation program, particularly as expressed through the advisory vote.

We received feedback on various aspects of our executive compensation program, including our pay-for-performance philosophy, our LTIP structure and shareholders’ expectations with respect to compensation amounts in light of our firm’s 2011 performance. The feedback from these shareholder discussions was communicated to our Compensation Committee for its consideration in connection with 2011 compensation determinations.

Further, as a result of shareholder engagement, we enhanced certain aspects of our proxy statement, including a new Executive Summary and our Compensation Discussion and Analysis (for example, further clarifying our risk-related forfeiture and recapture provisions).

NEO Compensation Highlights

 

  Ÿ  

70% of our NEOs’ 2011 annual variable compensation was in the form of 61,702 vested RSUs, and the remainder was in cash ($3 million). The terms of these RSUs are the same as the RSUs awarded to our NEOs last year, including delivery over three years, five-year transfer restrictions, and forfeiture and recapture provisions.

 

  Ÿ  

All of our NEOs must retain 75% of the after-tax shares they receive as compensation.

 

  Ÿ  

All of our NEOs are prohibited from hedging any shares of Common Stock, including those they can freely sell.

 

  Ÿ  

None of our NEOs has an employment agreement that provides for severance or “golden parachute” payments.

 

  Ÿ  

In February 2012, our Compensation Committee granted to each of our NEOs a long-term incentive compensation award under our LTIP with an initial notional value of $3 million.

See —Compensation Discussion and Analysis —for more details.

 

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Our Performance and Pay Over Time

We are committed to aligning compensation with performance, consistent with our pay-for-performance philosophy. Our Compensation Committee reviews our firm’s performance and the executive’s performance over the past year, as well as over the past several years, in connection with making its executive compensation determinations.

In light of a difficult operating environment for the financial services industry in 2011, including global macro-economic concerns that significantly affected our clients’ risk tolerance and willingness to transact, our performance declined in 2011 compared with 2010. Net revenues for 2011 were 26% lower than 2010 and our ROE for 2011 was 3.7% compared to 11.5% for 2010 (our adjusted ROE for 2011 was 5.9%, excluding the Series G Preferred Stock dividend, as described in Calculation of Adjusted Return on Average Common Shareholders’ Equity in Annex C). Consistent with our pay-for-performance philosophy, NEO compensation declined to reflect our firm’s weaker performance, and declined even more than the decrease in our net revenues.

Compared to 2010, 2011 annual compensation approved by our Compensation Committee for each NEO was down approximately 35%, while 2011 annual variable compensation for each NEO was down approximately 44%. Despite the challenging environment, for 2011 we ranked first in worldwide announced mergers and acquisitions and ranked first in worldwide equity and equity-related offerings, common stock offerings and initial public offerings (as reported by Thomson Reuters). We also managed our liquidity and capital conservatively, and reduced operating expenses by 14% compared with 2010.

The illustration below shows the decline in 2011 CEO annual compensation from 2010:

 

LOGO

 

 

* Comprised of salary and annual variable compensation (RSUs and cash) approved by our Compensation Committee with respect to 2010 and 2011. For more information on 2011 CEO annual compensation, as well as long-term incentive compensation under our LTIP, see —Compensation Discussion and Analysis.

Our compensation principles and practices are designed to align the long-term interests of our people with those of our shareholders. Accordingly, while this say on pay vote is an annual vote, we believe it is more appropriate to review our pay and performance over a multi-year period, particularly in light of the cyclical nature of our industry.

In addition, as a result of the significant portion of compensation awarded to our senior employees in the form of equity-based awards and the transfer restrictions and retention requirements imposed on these awards, the actual value that may be realized by our NEOs is highly dependent on the price of our Common Stock. Our NEOs received 70% of their 2011 annual variable compensation in the form of RSUs, further aligning their interests with those of our shareholders.

Our Compensation Committee retains discretion to determine the form and amount of compensation awarded to our NEOs. We believe that our Compensation Committee’s decisions for 2011 and in prior years demonstrate the responsible use of this discretion and reflect our firm’s commitment to paying for performance. We believe this discretion has permitted the Committee to better react to a rapidly changing economic and regulatory environment over the past several years and to continue to uphold the core philosophies of our compensation programs, including promoting our culture of attracting and retaining the best talent, teamwork and maintaining the safety and soundness of our firm.

As illustrated below, over time we have outperformed our core competitors (Bank of America Corporation, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley). Outperformance is measured by comparing our average ROE over the period to the average ROE reported by our core competitors over the period. From fiscal 2004 through fiscal 2007, our average ROE exceeded the average ROE of our core competitors by approximately 12.8 percentage points. Despite

 

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a difficult operating environment since the financial crisis, from fiscal 2008 through fiscal 2011 (including a one-month period in December 2008 for us and Morgan Stanley when our fiscal year-ends changed), our average ROE still exceeded the average ROE of our core competitors by approximately 9.1 percentage points.

From fiscal 2008 through fiscal 2011, the average annual compensation awarded to our CEO was approximately 80% less than the average annual compensation awarded to our CEO from fiscal 2004 through fiscal 2007. CEO annual compensation for each year is salary and annual variable compensation (RSUs, options and/or cash, as applicable) approved by our Compensation Committee for that year.

 

LOGO

2011 Say on Pay Vote

As required by Section 14A of the U.S. Securities Exchange Act of 1934, as amended (Exchange Act), the below resolution gives shareholders the opportunity to cast an advisory vote on the compensation of our NEOs, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the executive compensation tables and related disclosure.

Accordingly, we are asking our shareholders to vote on the following resolution:

RESOLVED, that the holders of Common Stock approve the compensation of our NEOs as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the executive compensation tables and related disclosure.

As this is an advisory vote, the result will not be binding, although our Compensation Committee will consider the outcome of the vote when evaluating the effectiveness of our compensation principles and practices.

For detailed information on the vote required for this matter and the choices available for casting your vote, please see —Frequently Asked Questions About our Annual Meeting.

 

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Independent Director Compensation

 

There were no changes to our independent director compensation from 2010 to 2011.

Key features of our independent director compensation program:

 

  Ÿ  

All RSUs granted to an independent director must be held for the director’s entire tenure on our Board, and shares of Common Stock underlying these RSUs are not delivered until the third quarter of the year following the year in which the independent director retires from our Board.

 

  Ÿ  

Our Board, upon the recommendation of our Corporate Governance and Nominating Committee, has a stock ownership policy that requires each independent director to own at least 5,000 shares of Common Stock or vested RSUs within two years of becoming a director.

 

  Ÿ  

For 2011, all independent directors were compensated solely in RSUs. There were no cash awards other than a prorated payment to a retired director (Mr. Scott), as discussed below.

 

  Ÿ  

Our independent directors do not receive any fees for attending Board or committee meetings.

 

  Ÿ  

Our Chairman and CEO and our President and COO each receive no compensation for Board service.

Beginning in 2012, our Lead Director will receive an additional annual fee of $25,000.

Our independent director compensation for 2011 was awarded on February 1, 2012. Directors who served for the entirety of 2011 were granted:

 

Components of Awards for
2011 Service
   Form of Payment

Annual Retainer—$75,000

   662 vested RSUs

Committee Chair Fee—$25,000

   221 vested RSUs

Annual Grant

   2,500 vested RSUs

If an independent director joins our Board or becomes Chair of a committee of our Board after the start of any year, he or she will receive compensation prorated according to the number of months during which he or she served in that position during that year. Accordingly, elements of compensation were prorated for Dr. Spar, who became a director in June 2011, and Ms. Burns, who became a director in October 2011. Dr. Spar was granted a $43,750 annual retainer in the form of 386 vested RSUs and an annual grant of 1,459 vested RSUs. Ms. Burns was granted an $18,750 annual retainer in the form of 166 vested RSUs and an annual grant of 625 vested RSUs.

The chart below indicates the elements and total value of RSUs granted to each independent director in February 2012 for services performed in 2011:

 

Name      Annual Retainer      Committee
Chair Fee
    

Annual Grant

2,500 RSUs

     Total
Value (b)

John H. Bryan

       ü            ü                  ü            $   383,801  

M. Michele Burns

       ü (a )                           ü (a )        $ 89,739  

Claes Dahlbäck

       ü                               ü            $ 358,729  

Stephen Friedman

       ü            ü                  ü            $ 383,801  

William W. George

       ü                               ü            $ 358,729  

James A. Johnson

       ü            ü                  ü            $ 383,801  

Lois D. Juliber

       ü                               ü            $ 358,729  

Lakshmi N. Mittal

       ü                               ü            $ 358,729  

James J. Schiro

       ü            ü                  ü            $ 383,801  

H. Lee Scott, Jr.*

       ü                               ü            $ 144,067  

Debora L. Spar

       ü (a )                           ü (a )        $ 209,315  

 

* Mr. Scott retired from our Board in May 2011 and received compensation prorated for the five months during which he served as director in 2011. Because he was no longer on our Board, our Board determined to pay his prorated compensation in cash rather than equity, as has been our practice. He received a prorated retainer of $31,250 and a prorated annual grant of $112,817.

 

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(a) Each of Ms. Burns and Dr. Spar received prorated compensation according to the number of months during which she served as director in 2011.

 

(b) The grant date fair value of RSUs granted on February 1, 2012 for services in 2011 in accordance with ASC 718. Grant date fair value is determined based on the closing price-per-share of our Common Stock on the NYSE on the date of grant ($113.45).

2011 Director Summary Compensation Table

The following table sets forth the 2011 compensation for our independent directors as required by SEC rules, including equity awards granted during 2011 even though these RSUs were granted in January 2011 for services performed in 2010.

 

Name    Fees Earned
or Paid in
Cash
     Stock
Awards (a)
     All Other
Compensation (b)
     Total  

John H. Bryan

     $  0         $  503,287        $  15,000         $  518,287   

M. Michele Burns*

     $  0         $             0         $  20,000         $    20,000   

Claes Dahlbäck

     $  0         $  478,284         $           0         $  478,284   

Stephen Friedman

     $  0