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June 10, 2021 at 12:01 PM
What did it take to get Goldman Sachs Group Inc. to relent on its opposition to studying the impact of mandatory arbitration?
A series of calls with a tiny investor in November, January and March, an embarrassing shareholder vote in April, a TV personality’s endorsement, and more pressure in May.
The initial response wasn’t promising when the Nathan Cummings Foundation, whose founder ran a conglomerate best-known for its Sara Lee desserts, filed its proposal asking the investment bank to look into how forced arbitration affects staff and the workplace.
The message from Goldman was that “we’re just basically misinformed,” Laura Campos, the foundation’s director of corporate and political accountability, said in an interview. The bank “spent a lot of time talking to us, but didn’t actually really want to do anything.”
Goldman fought the proposal, and it was defeated in April. But the margin of victory was slim — just one percentage point — and that got the attention of company executives, who changed course last week and agreed to do the study.
The activists’ victory is a story of how enough pressure at the right time can grab Wall Street’s attention, even if the effort gets off to a slow start.
Festering Problem
For years, Goldman has forced employees who allege harassment out of court and into the secretive world of arbitration.
But the foundation, which held just 290 shares when it filed its proposal, argued that it’s good for long-term shareholder value to give harassment claims their day in open court. It allows the company to deal head-on with problems that could otherwise fester, according to Campos.
“If you’ve got a leak in a pipe, you can definitely paint over the spots it creates on your ceiling,” she said. “But eventually you’re going to have an even bigger problem.”
