Goldman Should Join This Exclusive Club

Goldman Sachs announced last week that its Chief Executive, Lloyd Blankfein, received about $69 million in compensation in 2007 -- the highest compensation ever received by a Wall Street CEO. Mr. Blankfein received $26.8 million in cash and $41.1million in stock and options awards. The Goldman CEO also donated $200,000 of his pay (as a firm requirement) to the newly formed charitable organization, Goldman Sachs Gives.

What should strike you most about the Goldman Sachs announcement is not the size of Mr. Blankfein's pay package but how little he gave to Goldman Sachs Gives. True, Mr. Blankfein undoubtedly gives voluntarily and substantially to other causes in need. But, $200,000 is not a lot of money when one is making $69 million. To be specific, it is less than 3 tenths of a percent of his total pay.


Far from Wall Street are the Twin Cities of Minneapolis and St. Paul. Joe Nocera, in his Saturday New York Times column, reports on the strong legacy of corporate giving in this solidly Midwestern, metropolitan area. link While a number of the Twin Cities' corporate citizens are long gone (Great Northern Railroad and Pillsbury are two that were acquired), others within its corporate ranks continue to flourish. One in particular, Dayton Hudson, successfully re-made itself from a stodgy department store chain into a style-driven, trend-setting retailer, now named Target. Fortunately for the community, when Pillsbury was acquired it was by a local competitor named General Mills.

Target and General Mills are early members of a corporate association entitled the Five Percent Club that was formed back in the 1970's. Members of the "club" agreed to donate five percent of their net operating profits to charity. Today, the association is now known as The Keystone Club and its 214 members agree to donate at least 2% of their net profits to charities and non-profit causes. Amazingly, over half of the companies -- including Target and General Mills -- still donate at the 5 percent level.

The contrast between Target and General Mills on the one hand and Goldman Sachs on the other is striking. Goldman is a financial services juggernaut whose earnings are multiple times higher than Target (a discount retailer) or General Mills (primarily a maker of cereals and packaged foods). In 2006, Goldman earned $9.5 billion in profits versus $2.8 billion for Target and $1.1 billion for General Mills. Yet, Goldman gave away only $20 million through its foundation while Target and General Mills gave $150 million and $82 million, respectively. Goldman gave away less than 1% while Target and General Mills each maintained its 5% commitment.

All three of these companies face significant pressures to perform. While they are each leaders in their industry, intense competitive threats and macro-economic forces can play havoc on their balance sheets and income statements. And as public companies, they must meet the demands from shareholders, Wall Street analysts and investor activists who want profits to grow consistently from quarter to quarter. Yet, the Twin Cities' companies have chosen to meet these threats and demands while maintaining a heavier philanthropic commitment.

Goldman Sachs' commitment to public service and social responsibility is noteworthy and the pride of its culture. Yet, when it comes to ranking corporate philanthropy, the investment firm is nowhere near the top. Here is one final comparison to prove the point. The Goldman Sachs Foundation with over $275 million in net assets gave away about $18 million last year. In contrast, the General Mills Foundation gave slightly more away but with foundation assets of only $57 million. The $20 million it gave away was replenished with an equivalent amount by the company -- on top of the $41 million it gave away in corporate contributions and the $21 million in product donations.

For inspiration to give more, perhaps Mr. Blankfein and his colleagues at Goldman Sachs should look west of its Wall Street competitors – north by northwest to be more precise.