Corporate Governance

Executive Compensation and Federal Preemption of Delaware Law: Proposed Governance Provisions and in Henry Paulson's Opposition (Part 4)

By J. Robert Brown

Henry Paulson is leading the charge against the regulation of executive compensation in the Bailout Bill.  We wondered what kind of compensation he earned while at Goldman Sachs.  Paulson resigned as Chairman of the Board of Directors and Chief Executive Officer, effective June 28, 2006.  The table below from the proxy statement for 2006 indicates the payment that he received for half a year's work at Goldman Sachs:  $345,000 in salary and an $18.7 bonus.  

His compensation included $96,672 for a car and driver.  Over a five year period, he made over $46 million.  As one article put it:

• "Paulson made more than $38 million in 2005, according to Goldman's proxy statement, with most of that, $30.1 million, coming from restricted stock awards, and stock options valued at $7.3 million. He got $29.2 million in stock grants in 2004 and $20.8 million in 2003, on top of his base pay of $600,000 each of the last three years."

But that was only part of the payout received from Goldman in 2006.  He also received $7,390,666 in distributions of profits earned on private investment funds.  By virtue of his resignation from Goldman Sachs, the investment banking firm apparently cashed Paulson out of his options and restricted stock units.

• The authorized officers elected to cash-settle Mr. Paulson?s outstanding RSUs on June 30, 2006 at their fair market value and Options at their intrinsic value, in each case based on the closing price of Common Stock on June 29, 2006 ($152.20), the day prior to the cash-settlement date. As a result, Mr. Paulson received a cash payment of $110,086,998.  
  

• In addition, in accordance with the terms of the applicable Restricted Stock Agreement, Mr. Paulson?s 224,777 shares of restricted Common Stock became fully vested and the Committee approved the removal of transfer restrictions otherwise applicable until January 2009.

• Prior to his departure, Mr. Paulson and his wife held investments in a number of private equity and hedge funds managed by the firm. In order to avoid any actual or potential conflicts of interest due to the firm?s involvement with these funds and Mr. Paulson?s government service, the Committee determined that the firm should purchase these investments from Mr. Paulson and his wife at a price based on the net asset values of these investments. These purchases resulted in cash payments to Mr. Paulson and his wife in the aggregate amount of $45,972,540. In addition, Mr. Paulson?s wife redeemed her investment in a firm-managed hedge fund in accordance with the usual redemption provisions that are applicable to investments in this fund, which resulted in a total payment upon redemption of $5,455,830.

Full post as published by The Race to the Bottom on September 24, 2008 (boomark / email).