Goldman Sachs has been arguably the most controversial financial firm throughout the recent economic crisis. Critics have accused Goldman Sachs of selling financial products to institutional investors and betting against those same products with its own trading money, as well as hastening American International Group's collapse by liberally valuing its losses on securities that AIG insured.
Goldman Sachs received $12.9 billion in taxpayer money as a result of the eventual AIG bailout. On top of that, the firm also received a $10 billion loan through the government's Troubled Asset Relief Program. Nonetheless, in 2009, Goldman set aside $16.2 billion for employee compensation — almost $500,000 per employee. In this context, we want to say a few words on President Ruth Simmons' role as member of Goldman Sachs' Board of Directors and compensation committee.
In evaluating President Simmons' board membership, it is important to distinguish two ways in which she contributes to the corporate governance of Goldman Sachs. First, President Simmons brings to the board a unique sensitivity to the views of women, minorities and young people. She is one of two women on the board, the only African American and the only member whose primary background is in education.
In an interview with the editorial page board, President Simmons said she has worked to convey minority employees' issues to the firm's management and helped build an initiative to provide business management education to 10,000 women in developing countries throughout the world. She also said she keeps the company in touch with young people's values — things like sustainability, equality and work-life balance.
When it comes to these issues, we can't imagine a better advocate than President Simmons. In this regard, her perspective has a tremendously positive impact on Goldman Sachs. And since the firm employs 32,500 people worldwide and plays a major, global role in allocating capital and managing financial risk, President Simmons' board membership has positive ramifications on an international scale.
At the same time, as a member of the Board of Directors, President Simmons is responsible for exercising oversight in all areas of the firm — including the firm's more controversial financial and compensation practices. When we take into account these actions, we are less enthusiastic about President Simmons' board membership. We worry about whether her views on financial issues can in fact shape policy at Goldman Sachs to the same extent as her views on human resources issues. Fortunately, Simmons herself is very mindful of this concern.
"I am constantly probing, questioning whether or not I can make a difference. The moment that I feel I cannot make a difference, I'm gone," she told the editorial page board. We want President Simmons to hold herself to that statement, and knowing her, we trust that she will. The relative moderation of Goldman Sachs' 2009 employee compensation has been a nice gesture. CEO Lloyd Blankfein's bonus fell well short of what many expected. Yet, the firm's efforts to improve in the area of corporate citizenship must not stop there.
In the coming months, Goldman Sachs will exert great influence on America's economic recovery and the government's effort to design a new financial regulatory framework. We are glad that President Simmons will have a central seat at the table as both these processes move forward, and we hope — for the country's sake — that her voice is heard loud and clear.
Editorials are written by The Herald's editorial page board. Send comments to editorials@browndailyherald.com.
