The bank has been in the spotlight since a mid-level executive resigned and fired off a blistering attack on the firm in a New York Times op-ed on March 14, describing a "toxic and destructive" culture motivated by greed.

For the past two years, a group of religious institutions that hold Goldman shares has asked the investment bank to review executive compensation packages and has been successful in getting its proposal taken up at regular shareholders' meetings.

This year, the group, including the Sisters of St. Francis of Philadelphia, again sought to have its proposal voted on by shareholders. But for the first time, the U.S. Securities and Exchange Commission sided with Goldman, which argued it had already complied with the request. The SEC's letter of rejection was emailed to the religious groups' leaders on Thursday, the day after the former Goldman executive, Greg Smith, published his scathing op-ed piece in the Times. An official at the Nathan Cummings Foundation, a Jewish group that is the lead filer of the proposal, said she was somewhat surprised that the agency rejected its request given that the op-ed touched on exactly the issues it had hoped to address. The 2012 proposal would have asked for an independent board to review the risks, including reputational risks, associated with high executive compensation levels and disclose the findings to shareholders. "We were asking for an examination of whether Goldman's pay levels were appropriate," said Laura Campos, director of shareholder activities at the Nathan Cummings Foundation. "If people are only motivated by extremely high compensation, it focuses them on the wrong things and can be harmful to the culture."

Goldman CEO Lloyd Blankfein's base salary was tripled to $2 million in 2011, up from $600,000 the prior year. His share bonus was worth $12.6 million, a 42 percent increase from the year before.

PUSH ON EXECUTIVE COMP

Each annual proposal by the religious group has been worded slightly differently, but all urge the same thing: Goldman needs to curb and better disclose how it determines executive pay.

The SEC sided with Goldman this year because it felt the company had "substantially implemented" the proposal, an SEC spokesman said. "If the company's actions effectively moot the proposal, then we permit exclusion."

In its January 11 letter to the SEC, Goldman described a number of processes that the firm has in place that it says address the religious group's concerns.

For example, the company has an independent committee that reviews executive compensation packages, and it discloses the compensation principles in proxy reports to shareholders, according to the letter. A Goldman spokesman declined to comment beyond the letter.

Goldman's actions, however, still do not satisfy the religious group, Campos said.

"We don't think their current compensation disclosure looks at how compensation relates to internal risk-taking, and how so much compensation creates risks for the company," she said.

The religious group's 2010 proposal, which focused more on disclosing pay ratios between employees and executives, won 5.48 percent of regular shareholders' vote. The 2011 proposal which asked Goldman to evaluate whether senior executive compensation packages were excessive, and would explore how layoffs and fluctuations in revenue affect senior executive pay, won 4.29 percent of the vote.

"For us, the victory was not about winning the vote, it was about getting to present at the meeting," said Sister Nora Nash, director of corporate social responsibility for the Sisters of St. Francis.

Nash said that winning approval to present a resolution for vote at a shareholder meeting represents a moral victory of sorts. "It makes the issue public," she said.

Indeed, dozens of news stories were written about the group and Nash in the last two years, turning up the spotlight on executive pay. The group plans to keep pressing this issue in public.

Goldman's win may be short-lived, said Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware.

"It's a victory in a sense that it's kept off the proxy this year, but it doesn't make the issue go away," he said. "Getting those groups comfortable with what you're doing - that's the real victory."

(Reporting By Jessica Toonkel; Additional reporting by David Randall in New York; Editing by Jennifer Merritt and Matthew Lewis)

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