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Union "disappointed" by Goldman board choice

April 3, 2012: 6:20 PM ET

Goldman Sachs

Goldman's recent moves to revamp its board are unlikely to satisfy the firm's critics.

Fortune -- Goldman has fumbled another chance to improve its image.

The union pension fund that struck a deal with Goldman Sachs (GS) to appoint a lead director in return for dropping a shareholder proposal that could have cost CEO Lloyd Blankfein his job as chairman says it's unhappy with the Wall Street firm's choice. They say James Schiro, the board member Goldman announced yesterday it had selected for the new role, was on a list that the union submitted to the Wall Street firm of people it deemed unacceptable for the position.

"We are a little bit disappointed," says Lisa Lindsley, director of capital strategies for the American Federation of State County and Municipal Employees.

Lindsley says the union submitted its list when it struck a deal with Goldman in early February to drop a proposal that might have forced the company to appoint an independent chairman of its board. Currently, Blankfein serves as both Goldman's CEO and chairman. The list included board members that for various reasons the union felt would not be good advocates for outside shareholders. Schiro was on that list along with four other current Goldman board members. Lindsley says the list was just suggestions and not part of the deal.

Among the union concerns about Schiro are the fact that he also serves as an independent director at Pepsi. Lindsley says Pepsi has had executive compensation issues, and like Goldman does not have an independent non-executive chairman, something union and shareholder advocates believe is important check and balance on the power of CEOs. What's more, Schiro has been on Goldman's board for more than two years and he is also a past CEO of Goldman's auditor PriceWaterhouseCoopers, two other issues that could make it difficult for him to be an independent advocate for shareholder issues. Another potential problem: During Schiro's tenure as CEO of PwC, the accounting firm was criticized for having employees that owned shares in the firms they were auditing.

David Wells, a spokesman for Goldman Sachs, says, "The decision to elect Mr Schiro was made by our independent directors in an executive session with no management present. We are confident that he will serve all of our shareholders well as lead director."

Along with the appointment of Schiro, Goldman announced on Monday that two of its board members were stepping down. Goldman will soon announce replacements. The role of lead director had to come from Goldman's board members. But it's not clear whether Goldman could have waited to name the "lead" director after the new members were appointed to the board. Lindsley says union members were happy with the deal it struck with Goldman back in early February. But in the past few weeks, Goldman has been increasingly dogged by questions about its culture, particularly how it treats its clients. The SEC appears to be moving closer to bringing charges against Goldman for its role in selling a $1.3 billion mortgage bond that has cost investors, including Freddie Mac, hundreds of millions of dollars. Lindsley says AFSCME is hopeful that the two new board members Goldman picks will have a history of being good advocates for shareholder interests, and that it hopes the Schiro appointment will be temporary.

"If it's an interim step for a couple of months that's one thing," says Lindsley. "But if he stays in the position of lead director then I'm not sure this is progress at all."

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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