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Goldman’s Flip on Harassment Followed Campaign by Tiny Activist

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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.”

During calls with Goldman, Campos said, the bank argued that employees don’t mind mandatory arbitration.

When the foundation cited Cristina Chen-Oster’s massive class-action lawsuit against Goldman, the response was that ongoing litigation couldn’t be discussed. A spokesman for the bank had no comment.

Then two of the leading firms that advise shareholders joined the fight, recommending that clients vote against Goldman management.

“More information on the impact that the company’s standard arbitration provision has on Goldman Sachs’s employees may bring information to light that could result in improved recruitment, development and retention,” Institutional Shareholder Services said in its report.

At April’s shareholder meeting, former Fox News anchor Gretchen Carlson, whose lawsuit against Roger Ailes led to his ouster and a film, asked bank shareholders to support the measure.

The foundation kept up pressure after losing the vote, asking to speak with a Goldman board director. They got John F.W. Rogers, the board’s secretary, who’s been a powerful figure inside the company for decades. Then the firm did something unusual: it budged, agreeing to do a study that the foundation expects will be released by next year’s shareholder meeting.

The victory wasn’t as dramatic as when little-known investment firm Engine No. 1 shook up the board of oil giant Exxon Mobil Corp. in recent weeks. But the reverberations could be long-lasting.

“The burden is on Goldman Sachs to present a viable explanation for why they’re continuing to keep the policy in place,” said Meredith Benton, who founded consultancy Whistle Stop Capital and partnered with the group on the proposal. “They have a real opportunity to show how much their culture has changed by walking away from arbitration.”


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