Goldman Narrowly Defeats Carlson-Backed Arbitration Vote

(Bloomberg) -- Goldman Sachs Group Inc. faced an unexpected antagonist at its annual meeting Thursday as it keeps harassment complaints confidential -- Gretchen Carlson -- and almost half of shareholders sided with the former Fox News anchor.

Carlson, an early figure in the #MeToo movement after her lawsuit against longtime Fox News chief Roger Ailes led to his ouster and a movie, asked fellow Goldman Sachs shareholders to vote in favor of a measure on this year’s proxy that would force the bank to publish a report on how mandatory-arbitration affects its staff and the workplace. The proposal was defeated, but received the backing of 49% of shareholders.

“The false sense of protection that arbitration provides to employers may create an unquantified long-tail risk for investors,” Carlson and three other Goldman stakeholders wrote to the board in a letter this week. Goldman may see a “rush on the courts at a scale from which investors cannot estimate the potential damages” if the President Joe Biden’s administration eases arbitration requirements. Carlson is a Goldman shareholder, with her stake undisclosed in the letter.

Goldman, which is fighting one of Wall Street’s biggest class-action discrimination cases, was urged to take action after Wells Fargo & Co. did away with mandatory arbitration for sexual-harassment complaints last year. Wall Street firms are lagging behind Silicon Valley giants such as Facebook Inc., Alphabet Inc.’s Google and Microsoft Corp. that have done away with forced arbitration for sexual harassment.

Goldman’s board had recommended shareholders vote against the measure asking for a public report.

“The vote’s outcome is a very strong case that Goldman needs to take action,” Carlson said in a telephone interview after the meeting. “Can you imagine ignoring what almost half of your funders have asked for?”

Disputes are best resolved in arbitration, which provides mutual benefits to the firm and employees, such as speedier resolutions, lower costs and a lack of limitations on rights or remedies, the board wrote in this year’s proxy. It said Goldman has “zero tolerance” toward harassment and discrimination, “robust firm-wide controls” that encourage reporting and address misconduct, and training and other programs.

A lawsuit against Goldman was brought more than a decade ago by women who say the firm let managers make biased pay decisions and denied opportunities. The bank has tried to send the women into arbitration, though the plaintiffs said earlier this year they expect a trial in early 2022.

Proposal ‘Unnecessary’

“Arbitration is in no way used to cover up bad behavior,” Goldman Sachs Chief Executive Officer David Solomon said during Thursday’s meeting. The firm is “continually reviewing and enhancing” its procedures to fight sexual harassment, he said, calling the shareholder proposal “unnecessary.”

The request for a report was submitted by the Nathan Cummings Foundation, which has said mandatory arbitration -- typically taking place behind closed doors -- keeps misconduct secret and prevents workers from learning about shared concerns. It pointed to instances where discrimination or harassment festered quietly until employees stepped forward all at once, creating a sudden and significant brand liability.

The April 26 letter also was signed by a Goldman client, Bonny Meyer of impact investor Meyer Family Enterprises, and M. Blair Hull and Kristin Hull. Blair Hull had sold his trading firm to Goldman in the late 1990s. Kristin Hull runs Nia Impact Capital, a social impact fund based in Oakland, California.

Carlson testified this year before a U.S. House subcommittee about forced arbitration, arguing it silences victims of sexual harassment and protects perpetrators. Democratic lawmakers have proposed measures to curb the practice in the workplace and for consumers. But business leaders and some Republicans have expressed skepticism that arbitration should be limited.

Still, overall shareholder support for activist-investor proposals is rising. About 29% of shareholders voted in favor of proposals opposed by companies so far this proxy season. That’s the highest in at least six years, and up from 22% in 2016, according to data compiled by Bloomberg.

Two prominent proxy-advisory firms -- Glass, Lewis & Co. and Institutional Shareholder Services -- recommended investors vote in favor of the Nathan Cummings proposal.

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