By JOE BEL BRUNO Wall Street Journal
Goldman Sachs Group Inc. added something new to the laundry list of financial risks it faces: unflattering attention.
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In its annual report, the New York company said “adverse publicity” could have “a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.”

The unusual disclosure in a 12-page section of “risk factors” ranging from rocky financial markets to natural disasters is the latest sign of Goldman’s whipping-boy status among rivals, lawmakers and angry Americans because of the firm’s giant profits.

“Goldman has become one giant pinata to whack,” said Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, adding that he couldn’t recall a previous instance where a company cited bad publicity as a risk to its business. “It’s reflective of the rather bizarre political climate in which we operate.”

A Goldman spokesman declined to comment.

Some corporate-governance experts said the move isn’t surprising given all the unwelcome attention Goldman has received since the financial crisis erupted. In July, a Rolling Stone article compared Goldman to a “great vampire squid wrapped around the face of humanity.” The phrase has been widely repeated in other publications and online, along with Chief Executive Lloyd Blankfein’s comment to a U.K. newspaper in November that the firm is doing “God’s work.”
“They’ve determined that these kind of stories could have a material impact on their stock price, and view it as something they need to make investors aware of,” said Michael Ryan, president of advisory firm Proxy Governance.

Goldman has long viewed its communications department as a risk-related function, meaning executives realize that a misstep in how it deals with the media or an issue could cause unnecessary damage to the company’s brand name. As a result, Goldman’s communications chief is heavily involved with top executives and the firm’s inner workings.

As criticism of Goldman intensified, the firm has aggressively responded to stories it views as false or exaggerated. But the approach has drawn mixed reviews. In its filing Monday, the firm took another swipe at fault-finding coverage of Goldman, while acknowledging that the attention could rattle employees and customers of the firm.

“Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials or in lawsuits,” the filing said. Some experts predicted that other financial firms could invoke bad publicity as a risk factor in their securities filings.

Goldman also said its board of directors rejected demands from shareholders that the company investigate excessive compensation and take steps to recoup some of the awards given to executives.

Write to Joe Bel Bruno at joe.belbruno@dowjones.com

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