Goldman investors come close to forcing through pay shake-up

The Goldman Sachs chief executive, Lloyd Blankfein, has told the financial giant's shareholders they are "less sophisticated and have less understanding" of Wall Street pay issues than board members – and should therefore not have a say in setting remuneration policy at the company.

Shareholders at Goldman's annual meeting yesterday demanded the company get a handle on spiralling Wall Street pay. Campaigners came within a whisker of forcing the board to adopt a UK-style "say on pay" rule which would put its remuneration policy to an annual shareholder vote.

Fund managers, union members and individual investors questioned a culture where Wall Street firms keep leapfrogging each other to offer the most generous bonus packages for employees, and which led Goldman to pay its three most senior executives more than $67m (£34m) each last year. The "say on pay" proposal garnered 43 per cent of the vote, despite the board's strong recommendation that shareholders vote it down.

Mr Blankfein, who took home $68.5m in 2007, dismissed the idea of taking an annual "opinion poll" on Goldman's remuneration policy, saying it would constrain the board and interfere with the investment bank's ability to attract the best employees by paying them competitively.

"If I knew a decision was going to be put up for ratification by shareholders who are less sophisticated and have less understanding of the elements that go into it than the board of directors who are elected to do that, that will have an effect on the sorts of decisions I'd be making," Mr Blankfein told the AGM.

He was confronted by workers from Goldman's canteen operator Aramark, which is part-owned by Goldman's private equity division. Unions, who are striking for better pay at Aramark, protested outside and inside the meeting. Vernita Murdock, a former Aramark employee, said: "I'm pretty sure I could live on $67m but can Goldman board members live on $6.30 an hour? No worker should have to live like we do, choosing between going to the doctor and putting food on the table."

Tim Smith, of Walden Asset Management, argued in favour of the "say on pay" resolution. He said: "Compensation has spiralled out of control and it needs the voice of shareholders and responsible directors to bring compensation consultants back to earth."