DEF 14A 1 d447333ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Exchange Act of 1934

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The Goldman Sachs Group, Inc.

 

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             Proxy Statement

             2013 Annual Meeting of Shareholders

  LOGO     
      

 

 

 

 

 

 


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The Goldman Sachs Group, Inc.

Notice of 2013 Annual Meeting of Shareholders

 

 

Time and Date

9:30 a.m., local time, on Thursday, May 23, 2013

 

Place

Goldman Sachs offices located at 222 South Main Street, 14th floor, Salt Lake City, Utah 84101

 

Items of Business

  Election to our Board of Directors of the 12 director nominees named in the attached Proxy Statement for one-year terms

 

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

 

    Approval of The Goldman Sachs Amended and Restated Stock Incentive Plan (2013)

 

    Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013

 

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

 

    Transaction of such other business as may properly come before our 2013 Annual Meeting of Shareholders

 

Record Date

The record date for the determination of the shareholders entitled to vote at our Annual Meeting of Shareholders, or any adjournments or postponements thereof, was the close of business on March 25, 2013

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

Important Notice Regarding the Availability of Proxy Materials for our Annual Meeting to be held on May 23, 2013. Our Proxy Statement, 2012 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 12, 2013


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Table of Contents

 

 

Introduction and Executive Summary     1   
Corporate Governance     6   

Item 1. Election of Directors

    6   

Board Succession Planning

    6   

Our Director Nominees

    8   

Structure and Role of our Board

    16   

Board Leadership Structure

    16   

Board Oversight

    18   

Commitment of our Board – 2012 Board Meetings

    20   

Board Evaluation

    21   

Independence of Directors

    21   

Our Board Committees

    22   

Audit Committee Financial Expert

    24   

Compensation Committee’s Independent Consultant

    24   
Compensation Matters     25   

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

    25   

Compensation Highlights

    26   

Compensation Discussion and Analysis

    28   

Our Compensation Philosophy

    28   

2012 NEO Compensation Determinations

    30   

Additional Details on our NEOs’ Compensation

    33   

Long-Term Performance Incentive Plan

    36   

GS Gives

    37   

Executive Compensation

    38   

2012 Summary Compensation Table

    38   

2012 Grants of Plan-Based Awards

    40   

2012 Outstanding Equity Awards at Fiscal Year-End

    41   

2012 Option Exercises and Stock Vested

    42   

2012 Pension Benefits

    42   

2012 Non-Qualified Deferred Compensation

    43   

Potential Payments Upon Termination or
Change-in-Control

    45   

Report of our Compensation Committee

    48   

Non-Employee Director Compensation

    49   

Item 3. Approval of The Goldman Sachs
Amended and Restated Stock Incentive Plan (2013)

    53   
Audit Matters     60   

Report of our Audit Committee

    60   

Item 4. Ratification of Appointment of
Independent Registered Public Accounting Firm

    60   
Shareholder Proposals     62   
Certain Relationships and Related Transactions     70   
Beneficial Ownership     73   
Additional Information     76   
Frequently Asked Questions About our Annual Meeting     78   
Annex A: Additional Details on Director Independence     A-1   
Annex B: Goldman Sachs’ Compensation Principles     B-1   
Annex C: The Goldman Sachs Amended and Restated Stock Incentive Plan (2013)     C-1   
 

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      i   


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LOGO

April 12, 2013

Fellow Shareholders:

You are cordially invited to attend the 2013 Annual Meeting of Shareholders of The Goldman Sachs Group, Inc. We will hold the meeting on Thursday, May 23, 2013 at 9:30 a.m., local time, at our offices in Salt Lake City, Utah. We hope that you will be able to attend.

Enclosed you will find a notice setting forth the business expected to come before the meeting, a letter from our Lead Director, the Proxy Statement, a form of proxy and a copy of our 2012 Annual Report to Shareholders.

Your vote is very important to us. Whether or not you plan to attend the meeting in person, we hope that your shares are represented and voted.

While last year certainly presented its own challenges amidst rapidly shifting investor sentiment, we were pleased that our firm performed well relative to our peers, posting solid results. This performance was the result of a competitive position defined by our deep and global client franchise, a mix of core businesses to which we have demonstrated a longstanding commitment, a healthy and resilient balance sheet and the focus and enduring commitment of our people to our client-centered culture.

We never lose sight of the fact that we are stewards of an industry-leading franchise that was built over nearly 145 years. This means that while we have an obligation to meet the near-term demands of the current environment in which we operate, we need not completely surrender to them.

We remain focused on the needs of our clients, committed to prudent risk management, disciplined about our capital and expenses, intent on superior execution and determined to build on our market-leading positions. Our people and the culture they define have positioned us to meet these imperatives, and we have never been more confident in our ability to achieve attractive returns and create long-term value for our shareholders.

Gary Cohn, our President and Chief Operating Officer, and I expand on these and other themes concerning our performance, strategy and outlook in our 2012 Annual Report Letter to Shareholders, which I hope you will read.

In the meantime, I’d like to thank you for your investment in Goldman Sachs. I am optimistic about our future and proud to be part of a firm that has talented and dedicated people thoroughly committed to our success and, as a result, your investment. I look forward to welcoming many of you to our Annual Meeting.

 

LOGO

Lloyd C. Blankfein

Chairman and Chief Executive Officer


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LOGO

April 12, 2013

To my fellow shareholders:

It was a privilege to be elected by our independent directors as the Lead Director of our Board of Directors last year, a role that I have embraced wholeheartedly and a responsibility that I take very seriously. I am pleased to write this letter to you to communicate some key areas of focus for our Board over the past year.

We have an active Board with a great diversity of skills, experiences and viewpoints. Our committee structure, with each of our independent directors serving on each of our standing committees, allows each director to be engaged in an efficient, coordinated and thorough manner in all aspects of our Board’s work. This structure provides each of our independent directors with the information and tools needed to understand the risks our firm faces, our financial statements and reporting and how these elements as well as individual performance are woven into our compensation programs and decisions. This common knowledge base, covering all of the key areas of Board oversight, enhances our ability to oversee the management of our firm and to protect the interests of our shareholders.

One of the most important responsibilities we have as independent directors is to carefully evaluate and recommend for nomination new directors who we believe will serve as dedicated stewards of our shareholders’ interests. This past year we created a new approach to evaluating the mix of skills represented on our Board, which we found to be very effective. Two key components of this approach were one-on-one discussions that I held with each of the members of our Corporate Governance, Nominating and Public Responsibilities Committee (Governance Committee), and the development of a skills matrix. Through this process we concluded that international business experience, including financial industry experience, and risk management continue to be of great value to our Board, particularly in light of Stephen Friedman’s retirement next month. We were pleased to welcome three new directors with significant experience in these areas onto our Board. Adebayo Ogunlesi, Chairman and Managing Partner of Global Infrastructure Partners and former Executive Vice Chairman of Credit Suisse, joined our Board in October 2012; Mark Tucker, Executive Director, Group CEO and President of AIA Group Limited, joined our Board in November 2012; and David Viniar, our former Chief Financial Officer with over 30 years of experience at the firm, making him the longest serving CFO of a major financial institution as well as a widely recognized risk manager in the industry, joined our Board in January 2013. Each of them has already made significant contributions to our Board, and we look forward to their continued input in the future. In addition, Mr. Ogunlesi has agreed to become Chair of our Risk Committee when Steve Friedman retires, and we are pleased to have someone with his experience assume this important role. Steve’s judgment, financial acumen and objectivity have been of great value to our Board and our shareholders. We will miss working with him.

Another central focus for the independent directors of our Board is, as always, governance and the related oversight processes and policies. We continually review these processes and policies to ensure that the most effective systems are in place for our Board and our firm at any given time. To this end, our Board enhanced several of our governance practices in 2012, which are discussed below and described in greater detail in our Proxy Statement.

We adopted a new framework relating to both long-term and emergency executive succession planning, which included defining key criteria and responsibilities for certain executive roles and identifying the relevant skill set needed to successfully perform in such roles. Our independent directors held regular and thorough discussions on this topic, which discussions also served as additional background for the CEO evaluation. We found this construct to be effective for succession planning generally, as well as for the recent CFO transition we oversaw.


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We clarified that our Governance Committee would take the lead in oversight of our relationships with major external constituencies and of our reputation as well as be responsible for the review of our firm’s philanthropic and educational initiatives. Each of our standing Board committees is required by its charter to take our reputation into account in fulfilling its respective duties and responsibilities, and we continue to be very focused on the reputation of the firm. We expanded the scope of our Governance Committee’s responsibilities specifically to recognize the importance of this. In that connection, we also formed a new subcommittee of our Governance Committee, chaired by Bill George, to focus on these new responsibilities.

In addition, we expanded and revised the format of our Board and Committee evaluations to include both qualitative and quantitative feedback, which resulted in a more robust and thoughtful discussion about our performance. We also implemented for the first time a separate, individual evaluation by the other independent directors of my performance as Lead Director, the feedback from which has proved very helpful to me.

I want you to know that I am acutely aware of the immense responsibility that accompanies the role of Lead Director of a board, particularly at our firm where, over time, we have greatly enhanced this position. Throughout my first year as Lead Director, I have devoted a significant amount of time focusing on my obligations to you, our shareholders, and to our firm. I meet and speak regularly with Lloyd, as well as with other management and non-management employees. In particular, I am very involved in setting the agenda and reviewing and approving the materials for each meeting of our Board and our Governance Committee, as well as approving the agenda for the other standing committees of the Board.

Further, to gain better insight into your views and better serve your interests, I have met with various shareholders representing our diverse shareholder base, as well as with representatives from several of our key constituents. These meetings have provided me, and the other independent directors whom I represent at these meetings, with invaluable information about matters ranging from strategy, regulation and compensation philosophy to board composition and structure. I appreciate the benefits of speaking with, listening to and learning from our shareholders and am committed to continuing this engagement.

In addition to improved communication with shareholders, I am also focused on effective communication among the directors on our Board. I speak regularly with the independent chairs of our other Board committees and with each of our non-employee directors. We hold executive sessions of independent directors without management present at each in-person Board meeting, and the candid exchange of ideas at these sessions is extremely effective. Moreover, this past year I instituted a practice of reaching out to each non-employee director individually in order to obtain feedback and evaluations of both Board and director performance. Each of these conversations has informed the point of view that our directors bring to the boardroom and has contributed to our Board’s ability to actively and effectively oversee the management of our firm.

In the world of rapid change from both a regulatory and business standpoint, we are committed to continuous improvement in our governance and oversight processes. Each director brings a unique perspective that helps create a well-rounded Board that is best able to serve the interests of our shareholders. I am proud to work alongside these men and women who are committed to working tirelessly on your behalf. With your support, I look forward to the opportunity to continue to serve as your Lead Director and contribute to the bright future of this firm.

 

LOGO

James J. Schiro

Lead Director


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Introduction

 

Our Proxy Statement contains information about the matters to be voted on at our 2013 Annual Meeting of Shareholders (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.

We are pleased to be holding our Annual Meeting this year at our offices in Salt Lake City, our second largest location in the United States after our New York/New Jersey campus. Salt Lake City is becoming an increasingly important part of our global operations. We currently have approximately 1,500 employees and other staff there and are continuing to add jobs to this location. We believe that holding our Annual Meeting in Salt Lake City emphasizes the importance of our expanding presence in, and our commitment to, the region and our people there. We will also be providing a live, audio webcast of our Annual Meeting. Details about this webcast can be found on our website at www.gs.com/shareholders.

By April 12, 2013, we will have sent to certain of our shareholders a Notice of Internet Availability of Proxy Materials (Notice). The Notice includes instructions to access our Proxy Statement and 2012 Annual Report to Shareholders and to vote online. Shareholders who do not receive the Notice will continue to receive either a paper or an electronic copy of our proxy materials, which will be sent on or about April 16, 2013. 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 our 2013 Annual Meeting

 

      Board Recommendation     

For more

detail, see

page:

Management Proposals

                 

1. Election of Directors

   FOR each director          6   

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

   FOR          25   
3. Approval of The Goldman Sachs Amended and Restated Stock Incentive Plan (2013) (2013 SIP)    FOR          53   
4. Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2013    FOR          60   

Shareholder Proposals

                 

5. Human Rights Committee

Requests that our firm establish a Human Rights Committee

   AGAINST          62   

6. Goldman Sachs Lobbying Disclosure

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

   AGAINST          63   

7. Proxy Access for Shareholders

Requests that we adopt a specific proxy access regime

   AGAINST          66   

8. Maximization of Value for Shareholders

Requests that the Board engage an investment bank to consider the merger or sale of our firm

   AGAINST          68   

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      1   


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Recent Governance Developments

 

  Ÿ  

There have been several important developments regarding our Board composition:

 

 

  James J. Schiro has served as our Lead Director since May 2012.  

 

  Adebayo O. Ogunlesi and Mark E. Tucker joined our Board as independent directors in 2012.  

 

  Upon his retirement as Chief Financial Officer (CFO), David A. Viniar joined our Board as a non-employee director in January 2013. Harvey M. Schwartz became our CFO at that time.  

 

  Having reached the retirement age under our Corporate Governance Guidelines, Stephen Friedman will retire from our Board effective May 22, 2013; Mr. Ogunlesi will replace Mr. Friedman as Chair of our Risk Committee at that time.  

 

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

 

  Ÿ  

We expanded the role of our Corporate Governance and Nominating Committee:

 

 

  The Committee’s name was changed to the Corporate Governance, Nominating and Public Responsibilities Committee (Governance Committee).  

 

  We clarified that the Governance Committee would take the lead in oversight of our relationships with major external constituencies and of our reputation as well as review of our firm’s philanthropic and educational initiatives.  

 

  A new subcommittee (the Public Responsibilities Subcommittee) of the Governance Committee, chaired by William W. George, focuses specifically on these new responsibilities. The other members of the subcommittee are James A. Johnson, Mr. Schiro and Debora L. Spar.  

Our 2012 Performance

 

  Ÿ  

We had solid performance in 2012:

 

 

  Net earnings of $7.48 billion (a 68% increase from 2011)  

 

  Pre-tax earnings of $11.2 billion (an 82% increase from 2011)  

 

  Net revenues of $34.16 billion (a 19% increase from 2011)  

 

  Diluted earnings per common share of $14.13 (a more than 200% increase from 2011)1  

 

 

Return on average common shareholders’ equity (ROE) of 10.7% (a 189% increase from 2011)1

 

 

  Book value per common share (BVPS) of $144.67 (an 11% increase from 2011)  

 

  Second-lowest ratio of compensation and benefits to net revenues since we became a public company  

 

  Ÿ  

The graph below demonstrates our outperformance relative to the average of our core competitors2 with respect to 2012 ROE.

 

 

LOGO

 

1  Diluted earnings per common share and ROE for 2011 were reduced by the impact of a $1.64 billion preferred dividend related to the redemption of the firm’s Series G Preferred Stock.
2  Core competitors in the Core Competitor Average in both graphs on pages 2 and 3 are JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Bank of America Corporation. Bank of America Corporation is excluded for Pre-Tax Earnings Growth due to losses in 2011 preventing a year-over-year comparison.        

 

 

  2      Goldman Sachs         Proxy Statement for the 2013 Annual Meeting of Shareholders  


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  Ÿ  

The graph below shows the growth of our BVPS, net revenues and pre-tax earnings for 2012 compared to 2011 relative to the average of our core competitors for the same period.

 

 

LOGO

 

  Ÿ  

The graph below shows the reduction in our average compensation and benefits to net revenues ratio from fiscal 2000-2007 (pre-global financial crisis) compared to our average compensation and benefits to net revenues ratio from 2009-2012 (post-global financial crisis).

 

 

LOGO

Compensation ratio is defined as compensation and benefits expense as a percentage of net revenues. Represents our fiscal 2000-2007 average compensation ratio versus our 2009-2012 average compensation ratio. Compensation and benefits expense includes employee initial public offering and acquisition award expenses, if any, except for nonrecurring employee initial public offering and acquisition expense in 2000 of $290 million.

Other Company Statistics

 

  Ÿ  

Market capitalization of approximately $67.3 billion as of the record date.

 

 

  Ÿ  

460,782,218 shares of The Goldman Sachs Group, Inc. common stock (Common Stock) outstanding as of the record date.

 

 

  Ÿ  

32,400 staff members (includes employees, consultants and temporary staff) as of December 31, 2012.

 

 

  Ÿ  

For 2012 we ranked first in worldwide announced and completed mergers and acquisitions as well as in worldwide equity and equity-related offerings and common stock 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 $1.6 billion.

 

 

  Ÿ  

During 2012 we increased our quarterly dividend by $0.15 per share in the aggregate to $0.50 per share and repurchased approximately 42 million shares in the aggregate under our share repurchase program.

 

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      3   


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Named Executive Officer Compensation (see Compensation Matters beginning on page 25)

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

2012 Annual Compensation

 

  Ÿ  

Our 2012 named executive officers (NEOs) are Lloyd C. Blankfein (CEO), Gary D. Cohn (COO), David A. Viniar (CFO for 2012), J. Michael Evans and John S. Weinberg (two of our Vice Chairmen).

 

 

  Ÿ  

Consistent with our pay for performance philosophy, NEO compensation increased for 2012. Annual variable compensation for 2012 for our NEOs was $19 million for our CEO, $17.15 million for our COO and CFO and $15.15 million for each of our other NEOs.

 

 

  Ÿ  

Equity-based awards continue to constitute a significant portion of the annual variable compensation awarded to our NEOs. 70% of 2012 annual variable compensation awarded to our NEOs was in the form of restricted stock units (RSUs), and the remainder was in cash.

 

 

  Ÿ  

Key terms of the RSUs granted for 2012 performance (2012 Year-End RSUs) continue to include: pro-rata delivery over three years, five-year transfer restrictions that will apply from the date of grant to substantially all the shares of Common Stock underlying the restricted stock units (Shares at Risk) delivered to our NEOs and forfeiture and recapture provisions (Clawback Provisions).

 

Long-Term Performance Incentive Plan (LTIP)

 

  Ÿ  

In 2011 the first awards under our LTIP were granted. Long-term incentive awards granted under our LTIP are not part of annual compensation because they are not intended to compensate for past service but rather to further align our NEOs’ long-term compensation with our firm’s long-term future performance. No amounts are earned until the end of the performance period.

 

 

  Ÿ  

Consistent with the existing terms of the awards, in December 2012 our Compensation Committee extended the performance period of the LTIP awards granted in January 2011 for an additional five years, from December 2013 to December 2018, for each of our NEOs, other than Mr. Viniar. The performance objectives continue to apply during the extended performance period, no amounts are earned based on results for any one year and negative returns in any year will offset positive returns in another. The performance periods of both of Mr. Viniar’s outstanding LTIP awards were not extended as a result of his retirement as CFO.

 

 

  Ÿ  

In January 2013 our Compensation Committee granted to each NEO, other than Mr. Viniar, an award under our LTIP with an initial notional value of $5 million for each of our CEO and COO and $4 million for each of our other NEOs. The terms of these awards, including the performance metrics and thresholds, the Clawback Provisions and the minimum performance period of three years, are the same as the terms of the LTIP awards granted in February 2012 (2012 LTIP), other than the initial notional value; all terms, including performance objectives, continue to apply through the end of the performance period.

 

Additional Features of our Executive Compensation Program

 

  Ÿ  

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

 

 

  Ÿ  

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

 

 

  Ÿ  

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

 

 

  Ÿ  

Our seven senior executive officers (CEO, COO, CFO and Vice Chairmen, collectively, Senior Executives) must retain 75% of after-tax shares received as compensation, and all of our approximately 460 participating managing directors (PMDs) must retain 25% of such shares, in each case, for so long as he or she holds such position.

 

 

  Ÿ  

All of our executive officers are prohibited from hedging any shares of our Common Stock, even shares that may be freely sold. Equity-based awards and shares subject to transfer restrictions may not be pledged. None of our NEOs has pledged any shares of Common Stock.

 

 

  4      Goldman Sachs         Proxy Statement for the 2013 Annual Meeting of Shareholders  


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Corporate Governance Highlights (see Corporate Governance beginning on page 6)

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.

Our Board

 

      Director Nominees      Percentage of Independent
Director Nominees
    2012 Meetings  

Board

     12         75     13   

Audit Committee

     9         100     13   

Compensation Committee

     9         100     8   

Governance Committee

     9         100     8   

Risk Committee

     9         100     6   

Executive Sessions of Independent Directors

                    14 (a) 

 

  (a) 

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

 

 

  Ÿ  

Our current director attendance for Board and committee meetings averaged over 98% in 2012, and each director attended well over 75% of meetings (the threshold for disclosure under Securities and Exchange Commission (SEC) rules).

 

 

  Ÿ  

We require each director to own a minimum of 5,000 shares or RSUs, with a transition period for new directors.

 

 

  Ÿ  

All RSUs granted to a director must be held for the director’s entire tenure on our Board. Directors are not permitted to hedge or pledge these RSUs.

 

Governance Practices

 

  Ÿ  

In 2012 our independent directors appointed Mr. Schiro as our new Lead Director. In connection with this transition, Mr. Schiro and our independent directors worked together to enhance our existing governance practices by:

 

 

  Improving the process by which our Governance Committee reviews and considers candidates for, and the diversity of, our Board (board succession planning), including, for example, by utilizing a skills matrix geared to corporate strategy and the evolving regulatory environment as a tool to review board composition.  

 

  Ÿ  

Our Board thinks broadly about diversity. It considers a range of types of diversity, including race, gender, ethnicity, sexual orientation, culture, nationality and geography, as well as diversity of viewpoints, backgrounds, skills, experiences and expertise.

 

 

  Adopting a new framework relating to executive succession planning, both long-term and emergency, and facilitating regular and thorough discussions by our independent directors on this topic.  

 

  Expanding and changing our Board and Committee evaluations, including by adding a separate, individual evaluation of the Lead Director.  

 

  Placing additional focus on and structure around the CEO evaluation process, which is conducted by our Lead Director with our Governance Committee.  

 

  Implementing one-on-one discussions between the Lead Director and each non-employee director to obtain ongoing feedback and evaluations of Board and director performance.  

 

  Proactively reaching out, primarily through our Lead Director, to our shareholders and key constituents.  

Shareholder Rights

 

  Ÿ  

We have a single class share structure.

 

 

  Ÿ  

We do not have a “poison pill.”

 

 

  Ÿ  

We have no supermajority vote requirements in our by-laws or charter.

 

 

  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.

 

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      5   


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Corporate Governance

 

Item 1. Election of Directors

Our Board currently consists of 13 directors, 10 of whom are independent and one of whom is our recently retired CFO.

Pursuant to the policies and procedures set forth in our Corporate Governance Guidelines, Stephen Friedman, having reached the Board retirement age of 75, will not stand for re-election at our Annual Meeting. Our Board extends sincere gratitude to Mr. Friedman for over eight years of service. Mr. Friedman, formerly the Chair of our Audit Committee and currently the Chair of our Risk Committee, has worked diligently and has consistently provided the Board with astute and independent insight and advice. His extensive knowledge of our business, having worked at the firm from 1966 to 1994, and the experience gained from his subsequent positions within the financial industry, were invaluable to our Board and the risk management of the firm.

On the recommendation of our independent directors, our Board has determined that Adebayo O. Ogunlesi will replace Mr. Friedman as the Chair of our Risk Committee upon Mr. Friedman’s retirement. Mr. Ogunlesi was recommended by our independent Governance Committee based on, among other things, his financial expertise and financial industry experience.

Board Succession Planning

 

Our Governance 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 recommending individuals for nomination, election or re-election to our Board is a principal responsibility of our Governance Committee. The Committee carries out this function through an ongoing, year-round process, which includes the Committee’s annual evaluation of our Board.

Board of Directors’ Qualifications and Experience

Our Governance Committee does not set specific, minimum qualifications that directors must meet in order for the Committee to recommend them to our Board, but rather believes that each director and director candidate should be evaluated based on his or her individual merits, taking into account our firm’s needs and the composition of our Board. To assist the Committee in evaluating the needs of our Board and identifying director candidates, our Lead Director, based on his discussions with each member of our Governance Committee, has developed a matrix of certain skills and experiences that would be beneficial to have represented on our Board at any particular point in time.

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  

Extensive experience in the public, private or not-for-profit sectors, gained through their current and past senior executive and board positions, including on our Board; and

 

  Ÿ  

Active involvement in educational, charitable and community organizations.

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,

 

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consumer products, retail, industrial resources, manufacturing and academia, in both established and growth markets, and in the public, private and not-for-profit sectors. In the biographies of our director nominees below, we describe certain areas of individual expertise that each director nominee brings to our Board, including:

 

Directors’ Qualifications and Experience
Financial industry    Risk management    Accounting
Multi-industry experience    Business ethics    Credit evaluation
Corporate governance    Leadership    Human capital management
Global experience    Strategic thinking    Technology and new media
Management    Operations   

Government, law, public policy and regulatory affairs

Marketing and branding    Philanthropy   
Academia    Reputational and social issues   

While we value the financial industry experience our directors bring to our Board, we take very seriously any actual or perceived conflicts of interest. We maintain a policy with respect to outside director involvement with financial firms, such as private equity firms or hedge funds. Under this policy, in determining whether to approve any current or proposed affiliation of a non-employee director or director candidate with a financial firm, our Board will consider, among other things:

 

  Ÿ  

the nature of the director’s or candidate’s current or proposed role with respect to the financial firm (for example, advisor, executive officer or partner, as well as the type of focus and degree of involvement);

 

  Ÿ  

the nature and scope of such financial firm’s business; and

 

  Ÿ  

the legal, reputational, operational and business issues presented, and the nature, feasibility and scope of any restrictions, procedures or other steps that would be necessary or appropriate to ameliorate any perceived or potential future conflicts or other issues.

Diversity

Our Board believes that diversity is an important attribute of a well-functioning board. In selecting qualified candidates to serve as directors, our Governance Committee considers a range of types of diversity, including race, gender, ethnicity, sexual orientation, culture, nationality and geography, seeking to develop a board that, as a whole, reflects diverse viewpoints, backgrounds, skills, experiences and expertise. Among the factors the 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, as described below.

Process for the Review of Director Candidates

Throughout the year, our Governance Committee, which includes all of our independent directors and is chaired by our Lead Director, discusses, evaluates in detail and meets 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 people, our independent directors and our shareholders. To assist in identifying possible director candidates, the Committee has also retained a professional search firm to provide the Committee with additional potential candidates and background information for review and consideration.

After the Committee’s initial review of a potential director candidate’s professional experience and assessment as to how he or she would 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.

 

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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 strong, well-rounded and effective board that is collegial and responsive to the needs of our firm and our shareholders.

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

Recent Changes to our Board

As part of its ongoing review of Board composition and in anticipation of Mr. Friedman reaching the retirement age, our Governance Committee concluded that international business experience, including current experience in the financial industry, as well as risk management expertise, remain important attributes for our Board. To this end, our Board, upon the recommendation of our Governance Committee, appointed each of Mr. Ogunlesi (in October 2012), Mr. Tucker (in November 2012) and Mr. Viniar (in September 2012, effective January 2013) as a director to hold office for a term expiring at our Annual Meeting. Mr. Ogunlesi and Mr. Tucker were each appointed to all of our Board’s standing committees. The members of our Governance Committee, based on each director’s experience working closely with Mr. Viniar as CFO, believed he would be a valuable addition to the Board. Mr. Ogunlesi was identified to our Lead Director by our Chairman and CEO, and Mr. Tucker was identified to our Lead Director by a non-executive employee of our firm. Our Lead Director then conducted a preliminary assessment of each of Messrs. Ogunlesi and Tucker, including meeting with each of them, and proposed them for consideration by the full Governance Committee, which reviewed and considered these candidates through the process described above. Our Governance Committee determined that these individuals, as well as Mr. Viniar, possess important skills that will contribute to the effective functioning of our Board.

Our Director Nominees

 

After consideration of the factors described below, as well as the individual qualifications and experience 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.

Nomination Process

In considering whether to recommend that the Board nominate a director for re-election at our Annual Meeting, the Governance Committee considers a variety of factors, such as:

 

  Ÿ  

The extent to which the director’s skills, qualifications and experiences continue to contribute to the success of our Board;

 

  Ÿ  

Attendance and participation at, and preparation for, Board and Committee meetings;

 

  Ÿ  

Independence;

 

  Ÿ  

Outside board and other affiliations, including any actual or perceived conflicts of interest;

 

  Ÿ  

Feedback from the individual discussions between each non-employee director and our Lead Director;

 

  Ÿ  

Shareholder feedback; and

 

  Ÿ  

The extent to which the director continues to contribute to the diversity of our Board.

Each of our director nominees elected at our 2012 Annual Meeting of Shareholders received the overwhelming support of the votes cast.

 

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Name   Age   Independent   Director Since   Occupation/Career Highlights   Other
Current
Public
Company
Boards
 

Committee

Membership

Lloyd C. Blankfein

  58   No   April 2003   Our Chairman and CEO   0   None

M. Michele Burns

  54   Yes   October 2011   CEO, Retirement Policy Center sponsored by Marsh & McLennan Companies, Inc.   2  

All

Chair, Audit Committee

Gary D. Cohn

  52   No   June 2006   Our President and COO   0   None

Claes Dahlbäck(a)

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

William W. George

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

All

Chair, Public

Responsibilities Subcommittee

James A. Johnson

  69   Yes   May 1999   Former Vice Chairman, Perseus L.L.C.   2   All
Chair, Compensation Committee

Lakshmi N. Mittal

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

Adebayo O. Ogunlesi

  59   Yes   October 2012   Chairman and Managing Partner,
Global Infrastructure Partners
  2   All(b)

James J. Schiro

  67   Yes   May 2009  

Retired, Chairman and CEO,

Zurich Financial Services

  3   All
Lead Director
Chair, Governance Committee

Debora L. Spar

  49   Yes   June 2011   President, Barnard College   0   All

Mark E. Tucker

  55   Yes   November 2012   Executive Director, Group CEO and President, AIA Group Limited   0   All

David A. Viniar

  57   No   January 2013   Retired, CFO, The Goldman Sachs Group, Inc.   0   None

 

(a)

Mr. Dahlbäck also serves as a director of our subsidiary, Goldman Sachs International.

 

(b) 

As of May 22, 2013, Mr. Ogunlesi will be Chair of our Risk Committee.

If elected by our shareholders, the 12 director nominees, all of whom are currently members of our Board, will serve for a one-year term expiring at our 2014 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.

Each of our director nominees has been recommended for election by our Governance Committee and approved and nominated for election by our Board. All of our directors are elected by majority vote of our shareholders. 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 Governance Committee will then assess whether there is a significant reason for the director to remain on our Board, and will make a recommendation to our Board regarding the resignation.

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.

 

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Below is biographical information about our director nominees. This information is current as of February 1, 2013 and has been confirmed by each of our director nominees for inclusion in our Proxy Statement. There are no family relationships between any of our directors or executive officers.

 

 

LOGO    

Lloyd C. Blankfein, 58

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 Cornell Medical College

 

Ÿ  

Member, Board of Directors, Partnership for New York City

Experience and Qualifications

With over 30 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 strategy. Mr. Blankfein utilizes this firm-specific knowledge and experience in his role as Chairman to, among other things, guide Board discussions and keep our Board apprised of significant developments in our business.

 

 

LOGO    

M. Michele Burns, 54

Director Since: October 2011

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

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

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Chief Executive Officer, Retirement Policy Center, sponsored by Marsh & McLennan Companies, Inc. (MMC); Center focuses on retirement public policy issues (October 2011 – Present); Center Fellow and Strategic Advisor, Stanford University Center on Longevity (August 2012 – Present)

 

Ÿ  

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

 

Ÿ  

Chief Financial Officer, MMC, 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 our Board substantial expertise in accounting and the review and preparation of financial statements, which she draws upon as our Audit Committee Chair. In addition, as the former CEO 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, 52

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, American University

 

Ÿ  

Trustee, NYU Langone Medical Center

 

Ÿ  

Chairman, Advisory Board, NYU Hospital for Joint Diseases

 

Ÿ  

Trustee, Harlem Children’s Zone

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, 65

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  

Director, Goldman Sachs International

 

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 our Board in its oversight of the firm’s global investment banking and asset management businesses. Through his current and prior 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    

William W. George, 70

Director Since: December 2002

Committees: Chair, Public Responsibilities Subcommittee; member of all other 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  

Board member, World Economic Forum USA

 

Ÿ  

Board member, Guthrie Theater

 

Ÿ  

Trustee, Mayo Clinic

 

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  

Former 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 current and prior 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.

 

 

LOGO    

James A. Johnson, 69

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 and UnitedHealth Group Inc.

 

 

Career Highlights

Ÿ  

Vice Chairman, Perseus L.L.C., a merchant banking and private equity firm (April 2001 – June 2012)

 

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 and Treasurer, American Friends of Bilderberg

 

Ÿ  

Chairman Emeritus and Executive Committee Member, The Brookings Institution

 

Ÿ  

Council Member, Smithsonian Museum of African American History and Culture

 

Ÿ  

Chair, Advisory Council, Stanford University Center on Longevity

Experience and Qualifications

Through his 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. Since our initial public offering, Mr. Johnson’s commitment and service to our Board have been exemplary. His many years of service have provided him with a deep institutional knowledge base that helps provide perspective to our Board and guidance to our management. Further, he has extensive expertise in compensation matters at our firm and, as a result, has been an effective leader as Chair of our Compensation Committee. Through his service on the boards of directors of not-for-profit entities, Mr. Johnson has developed additional corporate governance expertise.

 

 

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LOGO    

Lakshmi N. Mittal, 62

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 and mining 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

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

 

 

LOGO    

Adebayo O. Ogunlesi, 59

Director Since: October 2012

Committees: Chair, Risk Committee (effective May 22, 2013); member of all other standing committees

Other Current Public Company Directorships: Callaway Golf Company and Kosmos Energy Ltd.

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Chairman and Managing Partner, Global Infrastructure Partners, a private equity firm that invests worldwide in infrastructure assets in the energy, transport and water and waste industry sectors (July 2006 – Present)

 

Ÿ  

Credit Suisse, a financial services company

 

  Executive Vice Chairman and Chief Client Officer (2004 – 2006)

 

  Member of Executive Board and Management Committee (2002 – 2006)

 

  Head of Global Investment Banking Department (2002 – 2004)

 

  Head of Global Energy Group (1997 – 2002)

 

  Various positions (1983 – 1993)

 

Ÿ  

Attorney, Cravath, Swaine & Moore LLP, a law firm headquartered in New York (1981 – 1983)

Other Professional Experience and Community Involvement

 

Ÿ  

Chairman, Africa Finance Corporation

 

Ÿ  

Member, Board of Trustees, New York-Presbyterian Hospital

 

Ÿ  

Member, National Board of Directors, The NAACP Legal Defense and Educational Fund, Inc.

 

Ÿ  

Member, Advisory Board, Smithsonian National Museum of African Art

 

Ÿ  

Member, Board of Directors, Partnership for New York City Fund

 

Ÿ  

Member, Board of Directors, Americans for Oxford

 

Ÿ  

Law Clerk to the Honorable Thurgood Marshall, Associate Justice of the United States Supreme Court (1980-1981)

Experience and Qualifications

As Chairman and Managing Partner of Global Infrastructure Partners and a former executive of Credit Suisse with over 20 years of experience in the financial services industry, Mr. Ogunlesi has extensive knowledge of the global investment banking and private equity sectors. Mr. Ogunlesi provides our Board with an experienced outlook on international business and global capital markets, including emerging markets. Through his service on the boards of directors and board committees of other public companies and not-for-profit entities, and in particular as Chair of the Nominating and Corporate Governance Committees at Callaway Golf and Kosmos Energy, Mr. Ogunlesi has developed an in-depth knowledge of current corporate governance trends and best practices.

 

 

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LOGO    

James J. Schiro, 67

Lead Director

Director Since: May 2009

Committees: Chair, Governance 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  

Senior Advisor, CVC Capital Partners

 

Ÿ  

Trustee Emeritus, 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

 

Ÿ  

Board Member, St. Michaels Special School

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 draws upon in his roles as our Lead Director and Governance Committee Chair.

 

 

LOGO    

Debora L. Spar, 49

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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LOGO    

Mark E. Tucker, 55

Director Since: November 2012

Committees: Member, all standing committees

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

AIA Group Limited (AIA Group), a life insurance group in the Asia Pacific region

 

  Executive Director, Group Chief Executive Officer and President, AIA Group (January 2011 – Present)

 

  Chairman, American International Assurance Company, Limited (February 2011 – Present)

 

  Chairman, American International Assurance Company (Bermuda) Limited (February 2011 – Present)

 

  Group Executive Chairman and Group Chief Executive Officer, AIA Group (October 2010 – December 2010)

 

  Executive Chairman, American International Assurance Company, Limited (July 2010 – October 2010)

 

Ÿ  

Group Chief Executive, Prudential plc, an international financial services group (2005-2009, and various other positions 1986-2003)

 

Ÿ  

Group Finance Director, HBOS plc, a banking and insurance company in the United Kingdom (2004 – 2005)

Other Professional Experience and Community Involvement

 

Ÿ  

Member, International Advisory Council, International Centre for Financial Regulation

 

Ÿ  

Prior Non-Executive Director, The Court of The Bank of England

 

Ÿ  

Prior Director, Edinburgh International Festival

Experience and Qualifications

Through his executive positions at AIA Group, Prudential plc and HBOS plc, Mr. Tucker brings to our Board substantial experience in the financial services industry, international business and global capital markets, particularly the Asia-Pacific region. This experience, along with his prior experience as a non-executive director on The Court of The Bank of England and member of its Audit and Risk and Financial Stability Committees, provides Mr. Tucker with a seasoned perspective on risk management and the stability of the financial system.

 

 

LOGO    

David A. Viniar, 57

Director Since: January 2013

Other Current Public Company Directorships: None

Other Public Company Directorships within past 5 years: None

 

 

Career Highlights

Ÿ  

Goldman Sachs

 

  Executive Vice President and Chief Financial Officer (May 1999 – January 2013)

 

  Head of Operations, Technology, Finance and Services Division (December 2002 – January 2013)

 

  Head of the Finance Division and Co-head of Credit Risk Management and Advisory and Firmwide Risk (December 2001 – December 2002)

 

  Co-head of Operations, Finance and Resources (March 1999 – December 2001)

Other Professional Experience and Community Involvement

 

Ÿ  

Former Trustee, Union College

Experience and Qualifications

With over 30 years of experience in various roles at Goldman Sachs, Mr. Viniar brings extensive knowledge and unique insight into our firm’s compliance, controls and risk management in this dynamic regulatory environment. Further, Mr. Viniar’s intimate knowledge of the firm’s capital management processes and assessments will be invaluable to our Board.

 

 

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Structure and Role of our Board

Board Leadership Structure

 

Our Current Leadership Structure

As a result of its most recent board leadership review in December 2012, our Governance Committee determined that combining the roles of Chairman and CEO is the most effective leadership structure for our firm at this time. Should our Governance Committee ever conclude otherwise, it will not hesitate to appoint an independent Chairman.

Among other reasons:

 

  Ÿ  

Our Board leadership structure is enhanced by the independent leadership provided by our Lead Director and independent committee chairs, the independence of our Board and the governance policies and practices in place at our firm.

 

 

  Our independent Lead Director, who is elected by our independent directors, has an expansive list of enumerated duties.  

 

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

 

  Our Lead Director speaks with each of our non-employee directors to obtain ongoing feedback and evaluations of Board and director performance.  

 

  Our independent committee chairs meet and speak regularly between meetings with each other and with members of our management as well as non-management employees.  

 

  The independent directors meet regularly in executive session, during which they discuss topics such as CEO performance and compensation, succession planning, board evaluation and strategy.  

 

  The annual evaluation of our Board included a separate, individual evaluation of the individual performance of our Lead Director.  

 

  Ÿ  

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

 

 

  It also demonstrates clear accountability to our shareholders, clients and other stakeholders for, among other things, delivering strong performance.  

 

  The structure further provides for robust communication between our Board and management and direct messaging from the Board to our people.  

 

  Ÿ  

Mr. Blankfein has extensive knowledge of all aspects of our current business, operations and risks. This knowledge helps him direct the focus of Board discussions.

 

 

  He has served as a knowledgeable resource for our independent directors both at and between 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.  

Annual Assessment of 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 has determined that:

 

  Ÿ  

Our Governance Committee should annually assess these roles and deliberate the merits of the Board’s leadership structure to ensure that the most efficient and appropriate structure is in place. To this end, in March 2011 we adopted a formal process for this review. This thorough review provides our Board with the necessary flexibility to make the appropriate determination about how our Board’s leadership can be structured most effectively for our firm’s needs, which may evolve over time.

 

  Ÿ  

If the Chairman is not an independent director, there should be an independent Lead Director appointed by our independent directors.

 

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During its most recent assessment, the Governance Committee reviewed various items, including the key responsibilities of our Chairman and CEO and our Lead Director:

 

Chairman and CEO

 

  Ÿ  

Chairs Board meetings.

 

  Ÿ  

Chairs annual shareholder meeting.

 

  Ÿ  

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

 

  Ÿ  

Works with Lead Director to set agenda for Board meetings (which the Lead Director also approves) 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 to the Board.

 

  Ÿ  

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

 

  Ÿ  

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

 

  Ÿ  

Sets and leads the implementation of corporate policy and strategy.

 

  Ÿ  

Interacts daily with our COO, CFO and other senior leadership of our firm.

 

  Ÿ  

Manages senior leadership of our firm.

 

  Ÿ  

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

Lead Director

 

  Ÿ  

Provides independent leadership.

 

  Ÿ  

Sets agenda for Board meetings, working with our Chairman (including adding items to and approving the agenda), and approves the related materials; approves the schedule for Board and committee meetings; sets agenda and approves materials for Governance Committee meetings; approves agenda for other committee meetings (along with our other independent committee chairs, who also approve the materials for such meetings).

 

  Ÿ  

Engages with our other independent directors to identify matters for discussion at executive sessions of independent directors.

 

  Ÿ  

Presides at executive sessions of independent directors.

 

  Ÿ  

Advises our Chairman of any decisions reached and suggestions made at the executive sessions, as appropriate.

 

  Ÿ  

Calls meetings of the independent directors.

 

  Ÿ  

Presides at each Board meeting at which the Chairman is not present.

 

  Ÿ  

Facilitates communication between the independent directors and our Chairman, including by presenting the Chairman’s views, concerns and issues to the independent directors and raising to the Chairman, as appropriate, views, concerns and issues of the independent directors.

 

  Ÿ  

Engages with our Chairman between Board meetings and assists with informing or engaging non-employee directors, as appropriate.

 

  Ÿ  

Engages with each non-employee director individually regarding the performance and functioning of the Board and other matters as appropriate.

 

  Ÿ  

Oversees our Board’s governance processes, including Board evaluations, succession planning and other governance-related matters.

 

  Ÿ  

Leads the annual CEO evaluation.

 

  Ÿ  

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

 

  Ÿ  

Is available for consultation and direct communication with shareholders and other key constituents, as appropriate.

 

 

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The Governance Committee also reviewed:

 

  Ÿ  

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

 

  nine of our 12 director nominees are independent under New York Stock Exchange (NYSE) rules (including for compensation committee members) and under SEC heightened audit committee standards;

 

  each independent director is engaged in an efficient, coordinated and thorough manner in all aspects of our 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;

 

  each of our directors may 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 may have had on our performance, including:

 

  the fact that evidence is inconclusive as to the effect that board leadership structure has on company performance;

 

  our firm’s performance since our initial public offering, during which time we have had a combined Chairman and CEO; and

 

  our firm’s solid performance in 2012, including the impact of extrinsic factors such as broader economic conditions and uncertainty in the regulatory environment.

 

  Ÿ  

The views of shareholders on leadership structure, including that support for shareholder proposals requesting an independent chairman over the past three years at U.S. public companies averaged approximately 33% of votes cast and was only approximately 19% of votes cast when shareholders last voted on an independent chairman proposal at Goldman Sachs in 2010.

 

  Ÿ  

The leadership structure at other global public companies and recent trends in leadership structure in the United States and globally.

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 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. In particular, certain key areas of Board oversight include:

 

  Ÿ  

CEO performance;

 

  Ÿ  

Succession planning;

 

  Ÿ  

Risk management;

 

  Ÿ  

Strategy;

 

  Ÿ  

Financial reporting; and

 

  Ÿ  

Business standards.

CEO Performance

Under the direction of our Lead Director, our Governance Committee annually evaluates Mr. Blankfein’s performance.

 

  Ÿ  

The Committee reviews the results of Mr. Blankfein’s “360 degree” review process (360 Review Process) evaluation, which includes qualitative narrative as well as quantitative feedback on a confidential basis in areas that include leadership and people management, reputational judgment and compliance with firm policies, risk management and client focus. This feedback is provided by a wide range of colleagues.

 

  Ÿ  

In addition, the independent directors regularly assess Mr. Blankfein’s performance both as CEO and as Chairman of the Board against the key criteria and responsibilities for these roles based on their own interactions with him.

 

  Ÿ  

The Committee discusses the evaluation in executive session, and communicates and discusses the evaluation in a closed session with Mr. Blankfein.

 

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Our Governance 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 our Compensation Committee in setting Mr. Blankfein’s compensation.

Succession Planning

Succession planning is a priority for our Board; 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.

We have developed comprehensive programs and processes for both emergency and long-term succession for our CEO and other senior management positions. Succession planning is reviewed by our Governance Committee with our CEO multiple times per year; our Lead Director also facilitates additional discussions with our independent directors about succession planning throughout the year, including at executive sessions.

During 2012, our Governance Committee adopted a new framework relating to succession planning. Under this framework, the Committee defines specific criteria for, and responsibilities of, each of the CEO, COO and CFO roles. The Committee then focuses on the particular skill set needed to succeed in each of these roles at our firm. Within this construct, the Committee reviews profiles (including results of 360 Review Process evaluations) of, and assesses, individuals identified as having potential for senior executive positions. The Committee monitors these individuals’ careers to ensure that, over time, they receive appropriate exposure both to our Board and to our diverse global businesses. Generally, our most senior people interact with our Board in various ways, such as through participation in Board meetings and other Board-related activities as well as meetings with individual directors during director visits to our offices around the world.

The most recent example of this is the transition of the CFO role from Mr. Viniar to Mr. Schwartz. Our Board was familiar with Mr. Schwartz through, among other things, his participation at Board meetings. The process for consideration of Mr. Viniar’s successor began well before Mr. Viniar tendered his retirement, including through various discussions between senior management and our Lead Director. In addition, various directors met with Mr. Viniar, Mr. Schwartz and other members of senior management regarding this specific transition, and in September 2012 our Governance Committee recommended to the Board that Mr. Schwartz be appointed as our CFO, effective January 2013.

Risk Management

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. This includes an assessment of risk from the standpoint of our long-term shareholders.

Our Board’s oversight of our risk management processes is conducted primarily by our Risk Committee, which currently 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 Chief Risk Officer (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.

Further, our Compensation Committee recognizes that our compensation program must be consistent with the safety and soundness of our firm. As part of our risk management, our Compensation Committee reviews our firmwide compensation program and policies to confirm its view that they do not raise risks that are reasonably likely to have a material adverse effect on our firm. 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 our Compensation Committee in its review of our compensation program. In addition, our CRO presents an annual compensation-related risk assessment (CRO Risk Assessment) to our

Compensation Committee, meeting jointly with the Risk Committee, to assist our Compensation Committee in its

 

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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.

Strategy

The formulation and implementation of our firm’s strategic plans are primarily the responsibility of management. However, through regular reviews and discussions with management, our Board takes an active role in overseeing our firm’s strategy. Our Board receives presentations and discusses strategy with management throughout the year at Board meetings. In addition, our Board holds an annual multi-day meeting focused primarily on strategy. Further, 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.

Our Lead Director helps to facilitate our Board’s oversight of strategy by ensuring that the directors receive adequate information about strategy and by discussing strategy with independent directors at executive sessions. Further, as part of our Governance Committee’s ongoing review of Board composition and succession planning, the Committee considers whether the skills and experiences represented by our directors allow them to effectively oversee strategy.

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 in closed sessions with each of our CFO and General Counsel, with our Director of Internal Audit (who is appointed by, and reports directly to, our Audit Committee) and with our independent auditors to discuss, among other things, other financial reporting matters. For more information on our Audit Committee, see —Our Board Committees and Audit Matters—Report of our Audit Committee.

Business Standards

Through our Business Standards Committee (BSC), we conducted a thorough review of our firm across every major business, region and activity of our firm. As of the end of the first quarter of 2013, all of the BSC’s 39 recommendations had been fully implemented. Although the formal implementation of the BSC’s recommendations is complete, this is not the end of the process. The implementation of these recommendations has resulted in significant improvements in areas such as client relationships, reputational risk management and personal accountability, and we expect further improvements in these areas. Because the focus of this effort is rooted more in the judgment of our people than in a formal rule set for decision making, we also will look to multiple sources of feedback—our Board, shareholders, clients, people, regulators and other key stakeholders—to ensure that our commitment to improvement is a living, breathing and dynamic process. In December 2012 the roles and responsibilities of our Governance Committee were expanded to explicitly include oversight of the new practices emanating from recommendations of the BSC, as well as client service issues. The Governance Committee has delegated to the Public Responsibilities Subcommittee specific oversight of these ongoing business standards matters as well as our firmwide Client and Business Standards Committee (CBSC). The CBSC was established as part of the BSC’s recommendations to place our client franchise at the center of our decision-making processes. The CBSC, which is chaired by Mr. Cohn, assesses and makes determinations regarding business standards and practices, reputational risk management and client service; the CBSC will report periodically to our Public Responsibilities Subcommittee about its work.

Commitment of our Board – 2012 Board Meetings

During 2012 our Board held 13 meetings. Our independent directors also met 14 times in executive session during 2012, which included seven executive sessions chaired by John H. Bryan or Mr. Schiro, each as our Lead Director for a portion of 2012, and seven additional sessions led by the chairs of our Audit, Risk and/or Compensation Committees during which our independent directors met without management present.

Our directors meet and speak frequently with senior management on an informal basis to receive updates on business developments. In addition, our individual directors have discussions with each other, with our CEO and with other members of our senior management team as well as with our people below the senior management level, as events warrant. These informal discussions promote ongoing engagement between meetings and allow our directors to gain

 

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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 well over 75% (the threshold for disclosure under SEC rules) of the meetings of our Board and the committees on which he or she served during 2012 for the period he or she served as director. Overall attendance at Board and committee meetings during 2012 averaged over 98% 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 attended the 2012 Annual Meeting.

Board Evaluation

The Governance Committee, which includes all of our independent directors, is responsible for annually evaluating the performance of our Board. In 2012 the format of the evaluation was changed to request both qualitative and quantitative feedback. Additional topics were added, and director responses to the over 30 questions were collated on an unattributed basis.

During the evaluation, conducted by our Lead Director, our independent directors provided input on numerous issues, such as:

 

  Ÿ  

effectiveness of their work as a Board;

 

  Ÿ  

effectiveness of our Committee structure;

 

  Ÿ  

individual performance of our Lead Director specifically;

 

  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  

satisfaction with succession planning processes;

 

  Ÿ  

satisfaction with shareholder communication processes;

 

  Ÿ  

extent to which shareholder value is considered by the Board in its decision-making process;

 

  Ÿ  

topics that should receive more attention and discussion; and

 

  Ÿ  

adequacy and effectiveness of our governance practices.

Our Lead Director also meets and speaks individually with each non-employee director to gather additional input. Our Lead Director communicates a summary of the results of the Board evaluation to our full Board, and our Board’s policies and practices are updated as appropriate as a result of director feedback.

Each of our Board’s committees also annually conducts a self-evaluation, and the processes for these evaluations were similarly expanded; Committee Chairs then communicate the results of these evaluations to the full Board.

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 not-for-profit organizations.

Our Board determined, upon the recommendation of our Governance Committee, that nine of our 10 non-employee director nominees (Ms. Burns, Mr. Dahlbäck, Mr. George, Mr. Johnson, Mr. Mittal, Mr. Ogunlesi, Mr. Schiro, Dr. Spar and Mr. Tucker) as well as Mr. Friedman, who is retiring in May 2013, are “independent” within the meaning of NYSE rules and our Director Independence Policy. Prior to their retirement from our Board in 2012, Mr. Bryan and Lois D. Juliber, each of whom served as a director for a portion of the year, also were determined to be independent.

 

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To assess independence, our Governance Committee and our Board were provided with detailed information about any relationships between the independent directors (and their immediate family members and affiliated entities) on the one hand, and Goldman Sachs and its affiliates on the other. For example, the Committee received 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 what we are required to take into account pursuant to SEC and NYSE rules.

Specifically, our Governance 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 certain of 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 2012:

 

  an executive officer or employee (for-profit entities) – Burns, George (a family member), Mittal (and a family member) and Tucker;

 

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

 

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

 

  an executive officer, employee, trustee, board member or similar position of a not-for-profit organization – Dahlbäck, Friedman (and family members), George (and family members), Johnson, Mittal (and family members), Ogunlesi, Schiro (and a family member) and Spar.

 

  Ÿ  

Charitable donations made in the ordinary course (including pursuant to our matching gift program) by the firm, The Goldman Sachs Foundation or GS Gives to a not-for-profit organization where the director or immediate family member is an employee, trustee, board member or has a similar position – Burns, Friedman (and family members), George (and a family member), Johnson, Mittal (and family members), Ogunlesi, 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 – Burns (and a family member), Friedman (and family members), George (and family members), Mittal (and family members), Ogunlesi (and a family member), Schiro (and family members) and Spar.

 

  Ÿ  

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

Our Board Committees

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

Each standing committee currently consists solely of directors who our Board has determined, upon the recommendation of our Governance 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.

Having each of our independent directors on each of our standing committees provides for a common knowledge base, which covers all of the key areas of Board oversight, and enhances our Board’s ability to oversee the management of our firm and protect the interests of our shareholders.

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

 

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        Committee Chair   2012 Meetings    Key Responsibilities
Audit      M. Michele Burns   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    Appoint and oversee the work of our Director of Internal Audit.

Ÿ    Prepare the Audit Committee Report.

Compensation      James A. Johnson   8   

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, equity-based and other compensation 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 Governance Committee); and

– diversity and employment practices.

Ÿ    Prepare the Compensation Committee Report.

Corporate Governance, Nominating and Public Responsibilities(a)      James J. Schiro   8   

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 us.

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

Ÿ    Assist our Board in its oversight of our firm’s relationships with major external constituencies and our reputation, including oversight of the implementation of the recommendations of the Business Standards Committee and of the Client and Business Standards Committee.

Ÿ    Review our firm’s philanthropic and educational initiatives.

Risk      Stephen Friedman (Mr. Ogunlesi will be Chair effective May 22, 2013)   6   

Ÿ    Assist our Board in its oversight of our firm’s overall risk-taking capacity and 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.

 

(a)

The Public Responsibilities Subcommittee, chaired by Mr. George, was formed in December 2012 and met once during 2012.

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.

 

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

 

  Ÿ  

Mr. Schiro and Ms. Burns, each in his or her capacity 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, Secretary to the Board 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, as well as our Secretary to the Board.

 

  Ÿ  

Mr. Bryan and Mr. Schiro, each in his capacity as our Lead Director and Chair of our Governance Committee, frequently met or had discussions with our CEO, Secretary to the Board and General Counsel.

 

  Ÿ  

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

Audit Committee Financial Expert

Our Board, upon the recommendation of our Governance Committee, 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 compensation consultant that is appropriately qualified and that provides services solely to the Committee and not to our firm. Accordingly, our Compensation Committee again retained Semler Brossy Consulting Group LLC (Semler Brossy) as its independent compensation consultant in 2012. Our Compensation Committee has used, and continues to use, Semler Brossy as its compensation consultant in light of Semler Brossy’s extensive experience working with a broad cross-section of companies, its multi-faceted business perspective, its expertise in the areas of executive compensation, management incentives and performance measurement and the quality of its counsel over the past seven years.

In light of new SEC rules, in September 2012, our Compensation Committee discussed various aspects of Semler Brossy’s relationship to our firm, the members of our Compensation Committee and our executive officers, including:

 

  Ÿ  

Semler Brossy provides services only to the Committee, and not to our firm;

 

  Ÿ  

Semler Brossy has no significant business or personal relationship with any member of the Committee or any executive officer;

 

  Ÿ  

The fees our firm paid to Semler Brossy in the context of Semler Brossy’s total revenues; and

 

  Ÿ  

None of Semler Brossy’s principals owns any shares of our Common Stock.

Considering this information, our Compensation Committee determined that Semler Brossy had no conflicts of interest in providing services to the Committee. See Compensation Matters—Compensation Discussion and Analysis for a discussion of Semler Brossy’s assessment of our compensation program for PMDs.

 

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Compensation Matters

 

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 our say on pay votes (no later than our 2017 Annual Meeting of Shareholders).

Prior Say on Pay Vote and Shareholder Engagement

At our 2012 Annual Meeting of Shareholders, our advisory vote to approve executive compensation received the overwhelming support of our shareholders (approximately 95% of votes cast). We believe this was an endorsement of:

 

  Ÿ  

our pay for performance philosophy;

 

  Ÿ  

the significant portion (70%) of 2011 annual variable compensation paid in RSUs;

 

  Ÿ  

the five-year transfer restrictions from the date of grant applicable to our equity-based awards;

 

  Ÿ  

the 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 2012 Annual Meeting of Shareholders in order to gain further insight and understanding into their views on our executive compensation program, including as expressed through the advisory vote.

We received feedback on various aspects of our executive compensation program, including our pay for performance philosophy, our Clawback Provisions, our retention policies and the terms of our LTIP awards. The feedback from these shareholder discussions was communicated to our Compensation Committee for its consideration in connection with 2012 compensation determinations.

See —Compensation Discussion and Analysis that follows for details on our 2012 NEO compensation.

2012 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 CD&A, 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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Compensation Highlights

 

Paying for Performance

 

  Ÿ  

Paying for performance is a critical element of our compensation philosophy.

 

 

  Ÿ  

Our performance in 2012 was solid, both in terms of absolute metrics and relative to our core competitors:

 

 

 

Net earnings increased by 68% and diluted earnings per common share increased by more than 200% to $14.13, in each case as compared to 2011.1

 

 

 

ROE (i.e., return on average common shareholders’ equity) was 10.7%, compared to 3.7% for 2011, and was well above the 4.0% average of our core competitors.1

 

 

  BVPS (i.e., book value per common share) increased by 11% compared to 2011, which was more than four times higher than the average BVPS growth of our core competitors.  

 

  Net revenues increased by 19% while compensation and benefits expense increased by just 6%, in each case compared to 2011.  

 

  Senior management continued to focus on expense management and efficiency efforts that began in early 2011, which was reflected in a 4% reduction in our non-compensation expenses compared to 2011, and our second-lowest ratio of compensation and benefits to net revenues since we became a public company.  

 

  Ÿ  

Consistent with our pay for performance philosophy, NEO compensation increased for 2012. Annual variable compensation for 2012 for our NEOs was as follows:

 

 

  $19 million, of which $13.3 million was in RSUs and $5.7 million was in cash (CEO)  

 

  $17.15 million, of which $12.005 million was in RSUs and $5.145 million was in cash (COO and then-CFO)  

 

  $15.15 million, of which $10.605 million was in RSUs and $4.545 million was in cash (other NEOs)  

 

  Ÿ  

None of our NEOs has an employment agreement that provides for guaranteed payments (other than base salary), severance or “golden parachute” payments.

 

 

1  Diluted earnings per common share and ROE for 2011 were reduced by the impact of a $1.64 billion preferred dividend related to the redemption of the firm’s Series G Preferred Stock.

 

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Compensation Highlights (continued)

 

Aligning Executive and Shareholder Interests and Encouraging a Long-Term Firmwide Focus

 

  Ÿ  

70% of 2012 annual variable compensation awarded to our NEOs was in the form of vested RSUs, with the remainder in cash.

 

 

  Ÿ  

Key terms of these RSUs continue to include features that encourage a long-term firmwide focus:

 

 

  Shares of Common Stock underlying RSUs (i.e., Shares at Risk) generally deliver in three equal installments on or about the first, second and third anniversaries of grant.  

 

  Five-year transfer restrictions (through January 2018) apply to 50% of the Shares at Risk, which is determined prior to tax withholding. For our NEOs, because the current tax withholding rates are approximately 50%, transfer restrictions will apply to all or substantially all Shares at Risk delivered to them under these awards.  

 

  RSUs and Shares at Risk are subject to Clawback Provisions as described below.  

 

  Ÿ  

Each of our NEOs must retain 75% of the after-tax shares received as compensation for so long as he holds a Senior Executive position (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 they can freely sell). None of our NEOs has pledged any shares of Common Stock.

 

 

  Ÿ  

Each of our NEOs, other than Mr. Viniar who retired effective January 31, 2013, was granted a long-term incentive compensation award under our LTIP in January 2013 with an initial notional value of $5 million for each of our CEO and COO and $4 million for each of our other NEOs, although no amounts are earned until the end of the performance period (December 2015 or, if extended, December 2020). In addition, consistent with the existing terms of the awards, in December 2012 our Compensation Committee extended the performance period of the LTIP awards granted in January 2011 from December 2013 to December 2018 for each of our NEOs, other than Mr. Viniar.

 

 

  Ÿ  

We are seeking shareholder approval of our 2013 SIP at this Annual Meeting:

 

 

  Approval of our 2013 SIP enables us to continue our practice of granting equity as compensation to our employees, which helps to align the interests of our employees with those of our shareholders and encourage a long-term firmwide focus.  

 

  Our regulators expect that a substantial portion of compensation awarded to executives and certain other employees will be in equity or equity-based instruments.  

 

  Our 2013 SIP has a three-year term, which provides our shareholders the opportunity to vote on our equity plan with greater frequency.  

Please see below for additional details on our NEO compensation.

 

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Compensation Discussion and Analysis

Our Compensation Committee, which is comprised of all of our independent directors, determined the compensation of our 2012 NEOs: Mr. Blankfein, our CEO, Mr. Cohn, our President and COO, Mr. Viniar, our then-CFO, Mr. Evans, a Vice Chairman and Global Head of Growth Markets, and Mr. Weinberg, a Vice Chairman and Co-Head of Investment Banking. Please see below for a discussion of our compensation policies and our Compensation Committee’s decisions regarding our NEOs’ compensation.

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 four key elements of our compensation philosophy:

 

  Ÿ  

Paying for performance;

 

  Ÿ  

Encouraging long-term firmwide focus;

 

  Ÿ  

Maintaining safety and soundness; and

 

  Ÿ  

Attracting and retaining talent.

Paying for Performance

We believe compensation should reflect performance. In order to do so, we look at our firm’s performance and an individual’s performance over the past year, as well as over the past several years. We believe that our senior people have more responsibility for our overall performance and, as a result, they have experienced more substantial fluctuations in the amount of their compensation year-over-year.

Consistent with our pay for performance philosophy, to avoid misaligning compensation and performance, guaranteed employment contracts are used only in exceptional circumstances (for example, for certain new hires), and multi-year guarantees should be avoided.

Encouraging Long-Term Firmwide Focus

We believe that our compensation program should encourage a long-term firmwide approach to performance and discourage imprudent risk-taking, and that the following aspects of our program further this objective. Please see —Additional Details on our NEOs’ Compensation for further details.

 

  Ÿ  

Significant Portion of Variable Compensation in Equity. We pay a significant portion of variable compensation to our senior employees in the form of equity-based awards that deliver over time. For 2012 our NEOs received 70% of their annual variable compensation in RSUs that deliver in equal installments over a three-year period and are not accelerated upon retirement. See —Executive CompensationPotential Payments Upon Termination or Change-in-Control for other types of terminations where delivery may be accelerated.

 

  Ÿ  

Transfer Restrictions. Transfer restrictions apply to Shares at Risk to further align the interests of our employees with those of our shareholders. 50% of the Shares at Risk (determined prior to tax withholding) are subject to transfer restrictions for five years after the date of grant. These restrictions remain in place even after retirement. These restrictions, coupled with our practice of paying a significant portion of variable compensation in the form of equity-based awards, lead to a considerable investment by our senior employees in our Common Stock over time. We believe that this investment advances our partnership culture of teamwork and stewardship of our firm.

 

  Ÿ  

Retention Requirements and Hedging Policies. Each Senior Executive must retain 75% of the after-tax shares received as compensation for so long as he holds a Senior Executive position. In addition, all of our executive officers, including our NEOs, are prohibited from hedging their equity-based awards and any shares of our Common Stock, including shares they can freely sell.

 

  Ÿ  

Clawback Provisions. 2012 Year-End RSUs and Shares at Risk are subject to Clawback Provisions that could result in forfeiture or recapture by us, including as a result of violating firm policies, engaging in any conduct detrimental to our firm or improper risk analysis.

 

  Ÿ  

LTIP. Our LTIP and the terms of the awards granted thereunder, including the relevant firmwide performance metrics (i.e., ROE and BVPS) and a minimum three-year performance period, are designed to further align incentives with long-term performance.

 

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Maintaining Safety and Soundness

Our compensation program is designed to be consistent with the safety and soundness of our firm. Sound risk management is a critical component of our compensation determination process, as reflected in our compensation framework (Compensation Framework), the CRO Risk Assessment and certain other risk considerations discussed below.

 

  Ÿ  

Compensation Framework. Our Compensation Framework was approved by our Compensation Committee and governs the variable compensation process for our employees (including our NEOs) who, individually or as part of a group, have the ability to expose us to material amounts of risk (Covered Employees). Our Compensation Framework is consistent with our Compensation Principles and:

 

   

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;

 

   

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

 

   

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

 

   

requires comprehensive monitoring of the implementation of our compensation process.

 

  Ÿ  

CRO Risk Assessment. Our CRO presents his CRO Risk Assessment annually to our Compensation Committee, in a joint meeting with our Risk Committee, to assist our Compensation Committee in its assessment of the effectiveness of our compensation program in addressing risk. The CRO Risk Assessment is particularly focused on whether our program is consistent with regulatory guidance providing that financial services firms should ensure that variable compensation does not encourage imprudent risk-taking.

In the CRO Risk Assessment for 2012, 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 reward in a manner that does not encourage imprudent risk-taking. In addition, our CRO expressed his conclusion that our firm has a risk management process that, among other things, is consistent with the safety and soundness of our firm. The CRO Risk Assessment also highlighted our:

 

   

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;

 

   

risk-taking authority process: there is a formal process for identifying Covered Employees;

 

   

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

 

   

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

 

   

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

 

  Ÿ  

Other Risk Considerations. 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 part of our annual 360 Review Process, which includes assessments of risk management, reputational judgment and compliance. For more detail, see —2012 NEO Compensation Determinations—Individual Performance—360 Review Process.

In addition, our business lines have different risk profiles, which are taken into account when determining compensation. Risks 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. In addition, we are expanding our documentation for compensation decisions and refining a back-testing process, with input from our CRO, which is designed to provide assurance that our variable compensation determinations in fact have not encouraged imprudent risk-taking. Further, to promote the independence of our control function employees, compensation for those employees is not determined by individuals in revenue-producing positions.

 

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Attracting and Retaining Talent

We understand the importance of hiring and retaining talented 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, similar to 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 27 years with our firm. The members of our Management Committee (currently our 30 most senior executives) have an average tenure of approximately 22 years with our firm.

2012 NEO Compensation Determinations

Our Compensation Committee determined the form and amount of annual compensation to be awarded to our NEOs for 2012, which included salary and variable compensation in the form of cash and RSUs deliverable as Shares at Risk, as set forth in the table below. 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 2011 and 2010. The LTIP awards (discussed below) are not part of annual compensation because no amounts are earned until the end of the relevant performance period, and are not included in this table.

 

                          Variable Compensation                            
Name and Principal Position   Year           Salary           Cash(a)      RSUs(b)      Total      Equity as % of
Variable
Compensation
    

Equity as

% of Total

 

Lloyd C. Blankfein

Chairman and CEO

    2012           $   2,000,000           $   5,700,000       $ 13,300,000       $   21,000,000         70         63   
    2011             2,000,000             3,000,000         7,000,000         12,000,000         70         58   
      2010             600,000             5,400,000         12,600,000         18,600,000         70         68   

Gary D. Cohn

President and COO

    2012             1,850,000             5,145,000         12,005,000         19,000,000         70         63   
    2011             1,850,000             3,000,000         7,000,000         11,850,000         70         59   
      2010             600,000             5,400,000         12,600,000         18,600,000         70         68   

David A. Viniar

CFO

    2012             1,850,000             5,145,000         12,005,000         19,000,000         70         63   
    2011             1,850,000             3,000,000         7,000,000         11,850,000         70         59   
      2010             600,000             5,400,000         12,600,000         18,600,000         70         68   

J. Michael Evans

Vice Chairman

    2012             1,850,000             4,545,000         10,605,000         17,000,000         70         62   
    2011             1,850,000             3,000,000         7,000,000         11,850,000         70         59   
      2010             600,000             5,400,000         12,600,000         18,600,000         70         68   

John S. Weinberg

Vice Chairman

    2012             1,850,000             4,545,000         10,605,000         17,000,000         70         62   
    2011             1,850,000             3,000,000         7,000,000         11,850,000         70         59   
      2010             600,000             5,400,000         12,600,000         18,600,000         70         68   

 

(a)

Cash amounts for 2012 were paid in January 2013.

 

(b) 

RSU amounts reflect the gross dollar amounts determined by our Compensation Committee. The grant date fair value of the 2012 awards (which were granted in January 2013), determined in accordance with generally accepted accounting principles, which includes a liquidity discount to reflect transfer restrictions on Shares at Risk, was approximately $11.3 million for our CEO, $10.2 million for each of our COO and CFO, and $9.0 million for each of our remaining NEOs. In accordance with SEC rules, the 2012 Summary Compensation Table below does not include these amounts because they were not granted in 2012. Instead, the 2013 Summary Compensation Table to be included in our proxy statement for our 2014 Annual Meeting of Shareholders will include the applicable grant date fair value of these awards for named executive officers.

 

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In determining the amount and form of compensation to be awarded to each of our NEOs, our Compensation Committee considered:

 

  Ÿ  

Our financial performance, including our performance relative to our core competitors;

 

  Ÿ  

The individual performance of our NEOs;

 

  Ÿ  

The CRO Risk Assessment;

 

  Ÿ  

In connection with our goal of attracting and retaining the best talent, the compensation levels and practices of other financial services firms;

 

  Ÿ  

Regulatory developments and feedback from our regulators; and

 

  Ÿ  

The results of last year’s advisory vote on NEO compensation as well as other shareholder feedback.

We discuss these considerations in more detail below.

Financial Performance

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

 

  Ÿ  

ROE: 10.7% for 2012, compared to 3.7% for 2011.1

 

  Ÿ  

Diluted earnings per share: $14.13 for 2012, compared to $4.51 for 2011.1

 

  Ÿ  

BVPS: $144.67 as of December 31, 2012, compared to $130.31 as of December 31, 2011.

 

  Ÿ  

Net earnings: $7.48 billion for 2012, compared to $4.44 billion for 2011.

 

  Ÿ  

Net revenues: $34.16 billion for 2012, compared to $28.81 billion for 2011.

 

  Ÿ  

Ratio of compensation and benefits to net revenues: 37.9%, compared to 42.4% for 2011.

 

  Ÿ  

Compensation and benefits expense: $12.94 billion for 2012, 6% higher than 2011.

 

  Ÿ  

Non-compensation expense: $10.01 billion for 2012, 4% lower than 2011.

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 reviewed certain financial metrics, based on publicly announced results, for our core competitors: Bank of America Corporation, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley.

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 2012 Annual Report on Form 10-K.

Individual Performance

360 Review Process

All of our NEOs were evaluated under our 360 Review Process. Our 360 Review Process reflects confidential input from a number of employees, including those who are senior to the reviewee, peers and those who are junior to the reviewee, regarding an array of performance measures. In addition to qualitative feedback, the 360 Review Process evaluations include numerical assessments of:

 

  Ÿ  

Risk management;

 

  Ÿ  

Reputational judgment and compliance with firm policies;

 

  Ÿ  

Leadership and people management;

 

  Ÿ  

Client focus;

 

  Ÿ  

Commercial effectiveness;

 

  Ÿ  

Culture and values; and

 

  Ÿ  

Diversity and inclusion.

 

1  ROE and diluted earnings per common share for 2011 were reduced by the impact of a $1.64 billion preferred dividend related to the redemption of the firm’s Series G Preferred Stock.

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      31   


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With respect to our NEOs, the results of the 360 Review Process were then considered as follows:

 

  Ÿ  

CEO: Under the direction of our Lead Director, our Governance Committee evaluated the performance of our CEO, including the results of his 360 Review Process evaluation. In addition, our Compensation Committee (which includes all members of our Governance Committee) met in executive session to discuss the performance of our CEO in connection with determining his compensation.

 

  Ÿ  

Other NEOs: Our CEO discussed the performance of our COO, including the results of his 360 Review Process, with our Compensation Committee. Our CEO and COO reviewed the performance of our other NEOs, including the results of their 360 Review Process evaluations, with our Compensation Committee. In addition, our CEO submitted variable compensation recommendations to the Committee for our other NEOs, but did not make recommendations about his own compensation.

Compensation Committee Assessment and Determination

In making its compensation determinations, our Compensation Committee considered, among other things discussed below, a summary for each NEO that included certain results of his 360 Review Process evaluation, and his responsibilities. Overall, each of our NEOs demonstrated exceptional leadership in 2012 and over the last few years. Further, each NEO performed extremely well throughout the year and made significant contributions to our firm’s overall success. 2012 compensation for our NEOs was differentiated among our NEOs primarily to reflect their individual performance, as well as their roles, with our CEO receiving the highest compensation among our NEOs, our COO and CFO receiving less than our CEO and our other NEOs receiving less than our CEO, COO and CFO. The contributions of each of our NEOs that the Committee considered included: Mr. Blankfein continued to be a strong leader who demonstrated considerable commitment to our firm and our clients, as well as a deep and nuanced understanding of the strategic aspects of all our major businesses. Mr. Cohn continued his focus on, and connectivity to, our core businesses through effective operational management. In addition, he spent considerable time and effort substantively engaging our clients around the world. Mr. Viniar continued to manage risk effectively for our firm, communicated well with our regulators, shareholders and other constituents and maintained strong relationships with other members of senior management, which enhanced coordination of firmwide policies and strategies. Mr. Evans demonstrated continued leadership in developing and delivering strategy for the growth markets with a keen focus on results and client satisfaction. Mr. Weinberg exemplified strong commitment to our investment banking franchise and our clients, and fostered our firm’s culture and values, while mentoring and developing internal talent.

Compensation-Related Risk Assessment

As discussed above in Our Compensation Philosophy, our CRO presented his annual CRO Risk Assessment to our Compensation Committee in a joint meeting with our Risk Committee. The presentation included our CRO’s 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 imprudent risk-taking and, therefore, there are no risks arising from those programs and policies that are reasonably likely to have a material adverse effect on our firm. The CRO Risk Assessment also stated that our firm has a risk management process so that variable compensation does not encourage imprudent 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. Semler Brossy, our Compensation Committee’s independent compensation consultant, also participated in this presentation.

Market for Talent

Our Compensation Committee evaluated our existing NEO compensation program, comparing it to other financial services firms. Consistent with past practice, our Compensation Committee asked Semler Brossy to assess our compensation program for our PMDs, including our NEOs. Semler Brossy is retained by, and 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 the MGMC unit of Towers Watson, one of our firm’s compensation consultants.

 

 

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In its assessment of our compensation program for PMDs, Semler Brossy confirmed that, consistent with last year, the program is 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 facilitate and support our firm’s approach to risk-taking and risk management. 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 its 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 this benchmarking 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 as well as compensation surveys conducted by the MGMC unit of Towers Watson.

Regulatory Developments

Throughout 2012 our senior management briefed our Compensation Committee on relevant regulatory developments. These included updates on compensation-related regulations and feedback on our compensation program from the Federal Reserve Board, the Financial Services Authority in the United Kingdom (the predecessor to the Prudential Regulation Authority and Financial Conduct Authority) and other regulators around the world. Determinations regarding NEO compensation for 2012 were consistent with our Compensation Framework, which we believe conforms to applicable regulations and regulatory guidance on variable compensation.

2012 Advisory Vote to Approve Executive Compensation

At our 2012 Annual Meeting of Shareholders, the advisory vote to approve executive compensation received the overwhelming support of our shareholders (approximately 95% 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 2012.

We engaged with many of our shareholders in advance of and following our 2012 Annual Meeting of Shareholders 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 Clawback Provisions, our retention policies and the terms of our LTIP awards. The feedback from shareholder discussions was communicated to our Compensation Committee for its consideration, and the Committee took the feedback into account in making its determinations.

Compensation Committee Determination

After considering all of the factors discussed above, including financial performance, individual performance and the market for talent in our industry, our Compensation Committee used its discretion to increase our NEOs’ annual variable compensation for 2012. The Committee determined that the annual variable compensation for each of our NEOs would be as follows: $19 million (CEO), $17.15 million (COO and then-CFO) and $15.15 million (other NEOs). No specific individual performance goals were used by the Committee in making these NEO compensation determinations. Consistent with regulatory guidance and the CRO Risk Assessment, the Committee determined that the appropriate balance of 2012 variable compensation was to pay 70% in RSUs and the remainder in cash.

In addition, we reduced the 2012 variable compensation available for our PMDs, including our NEOs, by approximately $160 million in the aggregate, which amount was used by our firm to make a charitable contribution to GS Gives. In January 2013, our Compensation Committee also granted to each NEO, other than Mr.  Viniar, a long-term incentive compensation award, which we discuss below.

Additional Details on our NEOs’ Compensation

Salaries

No changes were made to 2012 NEO base salaries from 2011. For 2012 Mr. Blankfein received a salary of $2 million and each of Mr. Cohn, Mr. Viniar, Mr. Evans and Mr. Weinberg received a salary of $1.85 million. Our Compensation Committee believes that these salary levels continue to provide the appropriate balance between fixed and variable compensation. Salaries for 2013 remain unchanged from 2012 levels.

 

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Restricted Stock Units and Shares at Risk

2012 Year-End RSUs were vested at grant and generally provide for Shares at Risk to be delivered in three equal installments on or about each of the first, second and third anniversaries of the grant date, subject to other terms and conditions of the award agreement. The number of RSUs awarded to each NEO for 2012 was determined by dividing the dollar value of the portion of the NEO’s variable compensation payable in RSUs (i.e., 70%) by $141.01, which was the closing price per share of our Common Stock on the NYSE on January 17, 2013, the grant date. In recent years, year-end RSUs have been granted shortly after the close of the relevant year.

Each of these RSUs is an unfunded, unsecured promise by us to deliver a Share at Risk on a future date. As a result, each of our NEOs has the same economic interest as our shareholders. This economic interest exists because the amount an NEO ultimately realizes from an RSU depends on the value of our Common Stock. Each 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 our Common Stock at about the same time as those dividends are paid to our shareholders.

2013 SIP. We are seeking shareholder approval of our 2013 SIP at this Annual Meeting so we can continue our practice of granting equity, which helps to align the interests of our employees with those of our shareholders and encourage a long-term firmwide focus. See —Approval of The Goldman Sachs Amended and Restated Stock Incentive Plan (2013) below for further details.

Transfer Restrictions. Transfer restrictions apply to 50% of the Shares at Risk delivered in respect of RSUs (determined prior to tax withholding). Accordingly, based on current tax withholding rates, which are approximately 50%, transfer restrictions will apply to all or substantially all Shares at Risk delivered to NEOs under these awards. An NEO cannot sell, exchange, transfer, assign, pledge, hedge or otherwise dispose of any of his 2012 Year-End RSUs or underlying Shares at Risk that are subject to transfer restrictions until January 2018, even if the NEO no longer is 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 2018.

Retention Requirements and Hedging Policy. In addition to imposing transfer restrictions, we also require each of our Senior Executives, for so long as he holds such a position, to retain sole beneficial ownership (including, in certain cases, ownership through his spouse or estate planning entities established by him) of a number of shares of our Common Stock equal to at least 75% of the shares received (net of payment of any option exercise price and taxes) as compensation since becoming a Senior Executive. We impose a similar 25% retention requirement on our approximately 460 PMDs. The retention requirements are described in more detail in Beneficial Ownership—Beneficial Ownership of Directors and Executive Officers.

Further, our NEOs are prohibited from 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 our 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.” All employees are prohibited from hedging their equity-based awards.

Clawback Provisions. 2012 Year-End RSUs and underlying Shares at Risk are subject to forfeiture or recapture by us in certain cases, even after the 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 (including those withheld to pay withholding taxes) and any other amounts paid or delivered in respect thereof.

2012 Year-End RSUs and underlying Shares at Risk provide for forfeiture or recapture if our Compensation Committee determines that during 2012, 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 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.

 

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Our Compensation Committee previously adopted guidelines that set forth a formal process regarding determinations to forfeit or recapture awards for improper risk analysis upon the occurrence of certain predetermined events (for example, in the event of annual firmwide, divisional, business unit or individual 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 (for NEOs) or its delegates (other than for our NEOs), with any determinations made by delegates reported to the Committee.

2012 Year-End RSUs granted to our NEOs also are subject to forfeiture 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 2012 Year-End RSUs if he engages in conduct constituting “cause” prior to delivery of the underlying Shares at Risk. We may recapture Shares at Risk underlying 2012 Year-End RSUs subject to transfer restrictions if an NEO engages in such conduct at any time through January 2018. Conduct constituting “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 2012 Year-End RSUs if he becomes associated with a “competitive enterprise” during 2013; two-thirds if he becomes associated with a “competitive enterprise” during 2014; and one-third if he becomes associated with a “competitive enterprise” during 2015. See —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 —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.”

Qualified Retirement Benefits

Each of our NEOs participates in The Goldman Sachs 401(k) Plan (401(k) Plan), which is our U.S. broad-based tax-qualified retirement plan. In 2012 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 $10,000. For 2012 each of our NEOs received a matching contribution of $10,000.

Perquisites and Other Benefits

Our NEOs received in 2012 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’ 2012 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 are also 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 (d) in —Executive Compensation—2012 Summary Compensation Table.

Section 162(m)

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 NEOs’ variable compensation for 2012, including equity-based awards, is determined under The Goldman Sachs Amended and Restated Restricted Partner Compensation Plan (RPCP). The RPCP is our shareholder-approved plan under which we pay variable compensation to members of our Management Committee, including our NEOs. The RPCP provides for a maximum amount of variable compensation determined pursuant to a formula contained in the RPCP, with the Compensation Committee retaining the discretion to

 

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pay less than the formula amount. Amounts awarded pursuant to the RPCP are intended to constitute qualified performance-based compensation under Section 162(m) of the Internal Revenue Code (Code) (which does not count against the $1 million deduction limit). However, we may decide to pay non-deductible variable compensation. In addition, salaries are not considered performance-based compensation under Section 162(m); therefore, salaries paid to our NEOs are not fully tax deductible by us.

Long-Term Performance Incentive Plan

To further incentivize long-term performance, in January 2013, our Compensation Committee granted to each NEO, other than Mr. Viniar, a long-term incentive award (2013 LTIP). Amounts earned under the 2013 LTIP awards, if any, will be 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 metrics and individual performance, as described below. The 2013 LTIP awards are not part of annual compensation.

The initial performance period for the 2013 LTIP awards is three years beginning in 2013, and our Compensation Committee may determine, by the end of 2014, to extend the period for another five years through the end of 2020. The same financial metrics and individual performance assessments would continue to apply to such an extension unless the Committee determines otherwise. Consistent with how our Compensation Committee thought about the roles and responsibilities of our NEOs in connection with determining annual variable compensation this year, taking into account the ability of each role to impact future firm performance, our Compensation Committee determined to grant a 2013 LTIP award with an initial notional value of $5 million to each of our CEO and COO, and an award with an initial notional value of $4 million to each of our remaining NEOs who received awards (compared to $3 million for each of the 2012 LTIP awards). The initial notional value increases and decreases by an amount equal to our “annual ROE” for each year during the performance period and, at the end of the performance period, is further adjusted based on “average ROE” and “average increase in BVPS” during the performance period. (See below for details on how we calculate ROE and BVPS under the awards.) Finally, our Compensation Committee may also, in its sole discretion based on its assessment of an individual NEO’s performance, adjust the amounts that may be paid under this award to each NEO (down to 0% or up to a maximum of 150% of the amount that would have been payable following the calculations described above). No amounts are paid until January 2016 or, if the period is extended, until January 2021. 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.

Consistent with the existing terms of the awards, in December 2012 our Compensation Committee extended the performance period of the LTIP awards granted in January 2011 (2011 LTIP) from December 2013 to December 2018 for each of our NEOs (other than Mr. Viniar) to provide a longer cycle over which to assess management’s performance, largely because the performance period to date has been characterized by extremely high levels of uncertainty in the broader financial markets and in the regulatory environment affecting our firm. As a result of this extension, which was discussed with Semler Brossy, the interests of our NEOs (other than Mr. Viniar) will continue to be aligned with the interests of our shareholders over a longer term. The performance objectives continue to apply during the extended performance period; no amounts are earned based on results for any one year, and negative returns in any year will offset positive returns in another. The performance periods of both of Mr. Viniar’s outstanding LTIP awards were not extended due to his retirement. As such, the amounts earned under Mr. Viniar’s 2011 LTIP award, if any, will be paid in cash in January 2014, and amounts earned under Mr. Viniar’s 2012 LTIP award, if any, will be paid in cash in January 2015.

Clawback Provisions

The 2013 LTIP awards are subject to the same Clawback Provisions as the 2012 Year-End RSUs and Shares at Risk for the entire performance period (including any extension). In addition, if our Compensation Committee determines that any payment was based on materially inaccurate financial statements or performance criteria, we may require the NEO to repay us the value of the award as of the payment date.

Firmwide Performance

The initial notional value of the LTIP award will be adjusted upward or downward by an amount equal to our annual ROE for 2013 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 based on annual ROE is then 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.

 

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Payout(a)     

Average ROE Over Performance Period

(Applies to 50% of Adjusted

Notional Value at

End of Performance Period)

    

Average Increase in BVPS

Over Performance Period

(Applies to 50% of Adjusted

Notional Value at End of Performance Period)

Zero

         <5%             <2%   

50%

         5%             2%   

100%

         10%             7%   

150%

         ³15%             ³12%   

 

(a)

Payout is scaled if results are between specified percentages.

In determining the above metrics and thresholds, our Compensation Committee reviewed, among other things, (i) our performance in 2012 and over the past four years and (ii) information on ROE and change in BVPS for 2008-2011 and through the third quarter of 2012 (because full year information was not yet available) for us and each of our core competitors, as well as Barclays PLC, Credit Suisse Group AG, Deutsche Bank AG and UBS AG, in each case, based on publicly available information. After this analysis, our Compensation Committee determined to use the same performance thresholds as in prior LTIP awards.

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 RPCP, which is a compensation plan in which all of our continuing NEOs participate. See Exhibit 10.3 of our 2012 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 metrics.

Individual Performance

Our Compensation Committee may also determine, in its sole discretion based on its assessment of an individual NEO’s performance, to adjust the amounts that may be paid 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.

 

GS Gives

We established GS Gives, a donor advised fund, 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 make recommendations of 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 2012, GS Gives accepted the recommendations of 478 current and retired PMDs and granted over $138.4 million to 1,580 not-for-profit organizations around the world. GS Gives underscores our commitment to philanthropy through diversified and impactful giving. The amounts donated in 2012 by GS Gives based on our NEOs’ recommendations were: Mr. Blankfein – $4.35 million; Mr. Cohn – $4.13 million; Mr. Viniar – $3.19 million; Mr. Evans – $7.17 million; and Mr. Weinberg – $4.17 million.

This year, we reduced the 2012 variable compensation available for our PMDs, including our NEOs, by approximately $160 million in the aggregate 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 following tables include compensation information for our NEOs for the last three years. For a discussion of 2012 NEO compensation, please read —Compensation Discussion and Analysis above.

The 2012 Summary Compensation Table below sets forth compensation information for our NEOs relating to 2012, 2011 and 2010.

Pursuant to SEC rules, the 2012 Summary Compensation Table is required to include for a particular year only those equity-based awards 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  

2012

 

  “Bonus” is cash variable compensation for 2012

 

  “Stock Awards” are RSUs awarded for 2011

 

  RSUs awarded for 2012 are not included because they were granted in January 2013. (See —Compensation Discussion and Analysis above for a discussion of these equity-based awards.)

 

  Ÿ  

2011

 

  “Bonus” is cash variable compensation for 2011

 

  “Stock Awards” are RSUs awarded for 2010

 

  Ÿ  

2010

 

  “Bonus” is cash variable compensation for 2010

 

  “Stock Awards” are RSUs awarded for 2009

2012 Summary Compensation Table

 

Name and

Principal

Position

  Year     Salary     Bonus    

Stock

Awards(b)

   

Option

Awards(c)

    Change
in
Pension
Value
    All Other
Compensation(d)
    Total  

Lloyd C. Blankfein

Chairman and CEO

    2012      $   2,000,000      $   5,700,000      $   5,273,409        $  0      $   3,943        $  323,514      $   13,300,866   
    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   

Gary D. Cohn

President and COO

    2012      $ 1,850,000      $ 5,145,000      $   5,273,409        $  0      $ 968        $  216,419      $ 12,485,796   
    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   

David A. Viniar(a)

CFO

    2012      $ 1,850,000      $ 5,145,000      $   5,273,409        $  0      $ 7,987        $  222,123      $ 12,498,519   
    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   

J. Michael Evans

Vice Chairman

    2012      $ 1,850,000      $ 4,545,000      $   5,273,409        $  0      $ 598        $  191,093      $ 11,860,100   
    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   

John S. Weinberg

Vice Chairman

    2012      $ 1,850,000      $ 4,545,000      $   5,273,409        $  0      $ 3,950        $  212,810      $ 11,885,169   
    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   

 

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(a) 

Effective January 31, 2013, Mr. Viniar retired as our CFO and joined our Board of Directors.

 

(b) 

Amounts included for 2012 represent the grant date fair value of RSUs granted on February 1, 2012 for services in 2011 (2011 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 2011 Year-End RSUs is determined by multiplying the aggregate number of RSUs by $113.45, the closing price per share of Common Stock on the NYSE on February 1, 2012, the grant date, and includes an approximately 25% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2011 Year-End RSUs. Amounts included for 2011 represent the grant date fair value of RSUs granted on January 26, 2011 for services in 2010 (2010 Year-End RSUs), in accordance with ASC 718. Grant date fair value for 2010 Year-End RSUs is determined by multiplying the aggregate number of RSUs by $161.31, the closing price per share of Common Stock on the NYSE on January 26, 2011, the grant date, and includes a 15% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2010 Year-End RSUs. Amounts included for 2010 represent the grant date fair value of RSUs granted on February 5, 2010 for services in 2009 (2009 Year-End RSUs), in accordance with ASC 718. Grant date fair value for 2009 Year-End RSUs is determined by multiplying the aggregate number of RSUs by $154.16, the closing price per share of Common Stock on the NYSE on February 5, 2010, the grant date, and includes a 15% liquidity discount to reflect the transfer restrictions on the Common Stock underlying the 2009 Year-End RSUs.

 

(c) 

No options to purchase Common Stock (Options) were granted to our NEOs during 2012, 2011 or 2010.

 

(d) 

The charts and narrative below describe the benefits and perquisites for 2012 contained in the “All Other Compensation” column above.

 

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

Mr. Blankfein

     $  10,000         $  120         $  60,793       $  821        $  19,591        $  67,200        $  47,467   

Mr. Cohn

     $  10,000         $  120         $  60,793       $  821        $  12,112        $  71,917        $  59,642   

Mr. Viniar

     $  10,000         $  120         $  60,793       $  821        $  18,738        $  57,288        $  72,229   

Mr. Evans

     $  10,000         $  120         $  60,793       $  821        $  13,752        $  56,516        $  47,709   

Mr. Weinberg

     $  10,000         $  120         $  60,793       $  821        $  14,392        $  83,175        $  42,556   

 

  * 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 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 $115,894 for Mr. Blankfein) for the benefit of our firm and our shareholders and believe it is required in light of 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.

We provide 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 our 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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2012 Grants of Plan-Based Awards

 

The awards included in this table are 2011 Year-End RSUs and 2012 LTIP awards, each of which were granted in February 2012.

The following table sets forth plan-based awards granted in early 2012. In accordance with SEC rules, the table does not include awards that were granted in 2013. 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

     2/1/2012                          61,702             $   5,273,409   
       2/1/2012         $  0       $   3,000,000                          

Gary D. Cohn

     2/1/2012                          61,702             $ 5,273,409   
       2/1/2012         $  0       $ 3,000,000                          

David A. Viniar

     2/1/2012                          61,702             $ 5,273,409   
       2/1/2012         $  0       $ 3,000,000                          

J. Michael Evans

     2/1/2012                          61,702             $ 5,273,409   
       2/1/2012         $  0       $ 3,000,000                          

John S. Weinberg

     2/1/2012                          61,702             $ 5,273,409   
       2/1/2012         $  0       $ 3,000,000                          

 

(a) 

Consists of cash awards made under our LTIP that are earned only after a minimum of three years based on firmwide performance metrics and individual performance. The initial performance period is three years beginning with 2012, and our Compensation Committee may determine, by the end of 2013, to extend the period for another five years through the end of 2019. The initial notional value of these awards will be adjusted upward or downward by an amount equal to our annual ROE for each year of the performance period. 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 based on annual ROE is then further adjusted based 50% on average ROE and 50% on average increase in BVPS. Finally, our Compensation Committee may, in its sole discretion based on its assessment of an individual NEO’s performance, adjust the amounts that may be paid under this award to each NEO (down to 0% or up to a maximum of 150% of the amount that would have been payable following the calculations described above). Please see —Compensation Discussion and AnalysisLong-Term Performance Incentive Plan for additional details on our LTIP.

 

(b) 

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 2011 Year-End RSUs. See —2012 Non-Qualified Deferred Compensation and —Potential Payments Upon Termination or Change-in-Control below for additional information on the 2011 Year-End RSUs.

 

(d) 

Amounts included represent the grant date fair value in accordance with ASC 718. Grant date fair value was determined by multiplying the aggregate number of RSUs by $113.45, the closing price per share of our Common Stock on the NYSE on February 1, 2012, the grant date, and includes a liquidity discount of approximately 25% to reflect the transfer restrictions on the Common Stock underlying the 2011 Year-End RSUs.

 

  40      Goldman Sachs         Proxy Statement for the 2013 Annual Meeting of Shareholders  


Table of Contents

2012 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, 2012, all of which were vested.

 

     Option Awards           Stock Awards  
Name    Option
Award
Year
     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     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                          

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                          

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                          

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                          

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                          

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      41   


Table of Contents

2012 Option Exercises and Stock Vested

The following table sets forth information regarding the exercise in 2012 of Options granted in late 2002 that would have expired in November 2012. The table also sets forth the value of the 2011 Year-End RSUs granted in February 2012.

 

    Option Awards           Stock Awards  
Name   Number of
Shares
Acquired on
Exercise (#)
     Value
Realized on
Exercise ($)(a)
          

Number of

Shares
Acquired on
Vesting (#)(b)

   

Value

Realized on
Vesting ($)(c)

 

Lloyd C. Blankfein

    137,670           $   5,978,557              61,702          $ 7,000,092   

Gary D. Cohn

    130,425           $ 5,528,369              61,702          $   7,000,092   

David A. Viniar

    50,751           $ 2,348,756              61,702          $ 7,000,092   

J. Michael Evans

    60,408           $ 2,503,308              61,702          $ 7,000,092   

John S. Weinberg

    41,094           $ 1,895,484              61,702          $ 7,000,092   

 

(a) 

Values were determined by multiplying the number of shares of our Common Stock underlying the Options by the difference between the closing price per share of our Common Stock on the NYSE on the date of exercise and the exercise price of the Options.

 

(b) 

Includes shares of Common Stock underlying 2011 Year-End RSUs, which were vested upon grant. One-third of these shares were delivered in December 2012, and one-third are deliverable on or about each of the second and third anniversaries of the grant date. Substantially all of the shares of Common Stock underlying the 2011 Year-End RSUs that are delivered to our NEOs are subject to transfer restrictions until January 2017.

 

(c) 

Values were determined by multiplying the aggregate number of RSUs by $113.45, the closing price per share of our Common Stock on the NYSE on February 1, 2012, the grant date. In accordance with SEC rules the —2012 Summary Compensation Table and —2012 Grants of Plan-Based Awards sections above include the grant date fair value of the 2011 Year-End RSUs calculated in accordance with ASC 718.

2012 Pension Benefits

The following table sets forth pension benefit information as of December 31, 2012. The Goldman Sachs Employees’ Pension Plan (GS Pension Plan) was frozen November 27, 2004 and our NEOs have not accrued additional benefits thereunder 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         $    33,945          

Gary D. Cohn

     GS Pension Plan         1         $      6,851          

David A. Viniar

     GS Pension Plan         6         $    66,744          

J. Michael Evans

     GS Pension Plan         1         $      4,646          

John S. Weinberg

     GS Pension Plan         3         $    31,218          

 

(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 once his benefits commence. 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 4.25% discount rate; and mortality estimates based on the RP-2000 white collar fully generational mortality table, with adjustments to reflect continued improvements in mortality. Mr. Viniar’s retirement as CFO effective January 31, 2013 does not impact these assumptions or the value as of December 31, 2012. Our GS Pension Plan provides for early retirement benefits in some cases, and all of our NEOs are eligible to elect early retirement benefits at any time prior to normal retirement age.

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

 

  42      Goldman Sachs         Proxy Statement for the 2013 Annual Meeting of Shareholders  


Table of Contents

2012 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 2012 (Vested and Undelivered RSUs) and (ii) our Non-Qualified Deferred Compensation Plan (NQDC Plan), which was closed to new participants and deferrals in December 2008.

The Vested and Undelivered RSUs generally were awarded for services in 2011, 2010 and 2009. RSUs generally are not transferable.

 

  Ÿ  

Amounts shown as “Registrant Contributions” represent the 2011 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 and Undelivered RSUs, as well as dividend equivalents earned and paid, during 2012; 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 2012.

Prior to December 2008 (when our NQDC Plan was frozen), each participant in our NQDC Plan 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 are generally 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.

 

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 RSUs            $   7,000,092      $    4,574,206        $   13,589,041     $ 8,568,460   
    NQDC Plan                 $ 13,687             $     1,279,320(e)(f)   

Gary D. Cohn

  Vested RSUs            $   7,000,092      $    4,574,206        $   13,589,041     $ 8,568,460   
    NQDC Plan                 $ (88,883          $     2,531,765(f)(g)   

David A. Viniar

  Vested RSUs            $   7,000,092      $    4,574,206        $   13,589,041     $ 8,568,460   
    NQDC Plan                 $  81,489             $     1,745,779(f)(g)   

J. Michael Evans

  Vested RSUs            $   7,000,092      $    4,574,206        $   13,589,041     $ 8,568,460   
    NQDC Plan                     —                 

John S. Weinberg

  Vested RSUs            $   7,000,092      $    4,574,206        $   13,589,041     $ 8,568,460   
    NQDC Plan                 $ (91,374          $ 2,318,165(f)   
(a) 

Values were determined by multiplying the aggregate number of RSUs by $113.45, the closing price per share of our Common Stock on the NYSE on February 1, 2012, the grant date. In accordance with SEC rules, the —2012 Summary Compensation Table and —2012 Grants of Plan-Based Awards sections include the grant date fair value of the 2011 Year-End RSUs calculated in accordance with ASC 718.

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      43   


Table of Contents
(b) 

Aggregate earnings include changes in the market value of the shares of Common Stock underlying Vested and 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 RSUs during 2012 pursuant to dividend equivalent rights also are included. The vested RSUs included in these amounts and their delivery dates are as follows:

 

Vested RSUs         Delivery

2011 Year-End RSUs 

     

One-third delivered in December 2012; one-third deliverable on

or about the second and third anniversaries of grant

2010 Year-End RSUs 

     

One-third delivered in each of January 2012 and December 2012;

one-third deliverable on or about the third anniversary of grant

2009 Year-End RSUs 

      One-third delivered in each of January 2011, January 2012 and December 2012

 

     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 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 2012) 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, 2012 under the following awards: one-third of the 2009 Year-End RSUs granted on February 5, 2010 and one-third of 2010 Year-End RSUs granted on January 26, 2011. Also includes shares of Common Stock that were delivered on December 31, 2012 under the following awards: one-third of the 2009 Year-End RSUs granted on February 5, 2010, one-third of the 2010 Year-End RSUs granted on January 26, 2011 and one-third of the 2011 Year-End RSUs granted on February 1, 2012. Consistent with the terms of the awards, our Compensation Committee recommended, and our Board determined, to deliver these awards on December 31, 2012 for employee retention purposes in light of impending individual tax rate increases. Values were determined by multiplying the aggregate number of RSUs by $108.27 in the case of awards delivered on January 25, 2012, and $127.56 in the case of awards delivered on December 31, 2012, in each case, the closing price per share of our Common Stock on the NYSE on the delivery date. Amounts paid on vested but undelivered RSUs during 2012 pursuant to dividend equivalent rights are also included.

 

(d) 

The Vested and Undelivered RSUs included in these amounts are 2011 Year-End RSUs and 2010 Year-End RSUs. These stock awards were previously reported in the Summary Compensation Table. Values for RSUs were determined by multiplying the number of RSUs by $127.56, the closing price per share of our Common Stock on the NYSE on December 31, 2012.

 

(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.

 

  44      Goldman Sachs         Proxy Statement for the 2013 Annual Meeting of Shareholders  


Table of Contents

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 (2003 SIP), our 2013 SIP, if approved by our shareholders at this Annual Meeting, 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 —2012 Pension Benefits and —2012 Non-Qualified Deferred Compensation sections above. The terms of the outstanding LTIP awards 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 will be provided to the participant for services provided in that year, subject to the formula in the RPCP. There is no severance provided under our RPCP.

Set forth below is a calculation of the potential benefits to each of our NEOs (including Mr. Viniar) assuming a termination of employment occurred on December 31, 2012, in accordance with SEC rules. Mr. Viniar’s retirement as CFO effective January 31, 2013 does not impact these assumptions or the value as of December 31, 2012. 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,   Lloyd C. Blankfein      $          0       $ 305,932      $ 305,932   

Disability or Conflicted Employment(c) or Downsizing(d)

 

Gary D. Cohn

     $          0       $ 372,928      $ 372,928   
 

David A. Viniar

     $          0       $ 308,075      $ 308,075   
 

J. Michael Evans

     $          0       $ 399,523      $ 399,523   
   

John S. Weinberg

     $          0       $ 356,797      $ 356,797   

 

(a) 

Except as discussed below, upon an NEO’s termination without Violation (as defined below), shares of Common Stock underlying RSUs will continue to be delivered on schedule, and Options will remain exercisable for their full term, provided that, for 2011 Year-End RSUs and 2010 Year-End RSUs, the NEO does not become associated with a Competitive Enterprise (as defined below). If the NEO does become associated with a Competitive Enterprise, the NEO will forfeit his benefits under our retiree health care program and, for 2011 Year-End RSUs, the NEO generally would have forfeited all of these awards if the association occurred in 2012; will forfeit two-thirds of these awards if the association occurs in 2013; and will forfeit one-third of these awards if association occurs in 2014. For 2010 Year-End RSUs, the NEO generally would have forfeited two-thirds of these awards if the association occurred in 2012 and will forfeit one-third of these awards if association occurs in 2013. 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 also may be recaptured.

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      45   


Table of Contents
     RSU awards also are subject to additional risk-related Clawback Provisions included in the definition of Violations below. As a result of these provisions, for example, an NEO will forfeit all of his 2011 Year-End RSUs, 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 2011 (with respect to 2011 Year-End RSUs), 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, our 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 year-end, see —2012 Outstanding Equity Awards at Fiscal Year-End and —2012 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 with $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. If the NEO does become associated with a Competitive Enterprise, the awards would be treated as set forth in footnote (a) above for that situation.

 

     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.

 

(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) 

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 our 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 a December 31, 2012 retirement date and the following assumptions: a 4.25% 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 9.5% (initial rate for medical and pharmacy) and 2.5% (ultimate rate for medical and pharmacy), 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). Values and assumptions shown reflect that effective January 1, 2018, the value of the benefit under our retiree health care program for our NEOs will not exceed the annual limits under Section 4980I of the Code.

As PMDs, our NEOs are generally 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 the NEO (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.

 

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“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 who 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:

 

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For awards granted after 2009 (i.e., RSUs), 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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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;

 

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Failing to perform obligations under any agreement with us;

 

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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;

 

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

 

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Any event constituting Cause;

 

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

 

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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;

 

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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;

 

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

 

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With respect to 2011 Year-End RSUs and 2010 Year-End RSUs, our firm failing to maintain our “minimum tier 1 capital ratio” (as defined in the Federal Reserve Board 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.”

 

Goldman Sachs      Proxy Statement for the 2013 Annual Meeting of Shareholders      47   


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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

M. Michele Burns

Claes Dahlbäck

Stephen Friedman

William W. George

Lakshmi N. Mittal

Adebayo O. Ogunlesi

James J. Schiro

Debora L. Spar

Mark E. Tucker