Goldman Sachs continues to lead.

Goldman Sachs is, in terms of share price performance, one of the strongest year-to-dated. Shares of the bank year-to-dated surged 43% with a market cap of US$55 billion. That is a terrific achievement given the daily bombardment of doom and gloom predictions by pundits such as Marc Faber or Nouriel Roubini. And make no mistakes, the market is efficient and rational because Goldman Sachs, in my opinion, will continue to lead Wall Street. It is because they are really smart. Just look at how its Chief Executive Lloyd Blankfein reacted to the protest of two women and you will know.

Blankfein had just begun speaking at the Council of Institutional Investors’ spring conference today when two women mounted the stage next to him and unfurled a banner reading “we want our $ $ $ $ back.” Goldman Sachs, which accepted $10 billion in government aid last year, is among more than 500 financial companies that took Treasury funds.

Blankfein, 54, stopped and asked the audience, “Everybody got that?” He then turned to the protesters, who didn’t identify themselves, shook hands with one and said, “How about this? I’ll address that at the end. They’ve seen it. I’ll address it at the end if you get off now.”

They took his advice, stepping off the stage and settling in the audience.

Through small gesture like shaking hand and making promise to address the problem later, Mr. Blankfein has successfully calmed the dissents. Quite a brilliant move indeed. As a matter of fact, the speech made by Mr. Blankfein has touched on many sensitive subjects like the executive pay and the future regulatory regieme. Anyone who is interested in the field of Finance should take note. The initiatives proposed by Lloyd Blankfein may become the industry standard. They include:

a) Power granted to Risk and Control Manager. Risk managers need to have at least equal stature with their counterparts in revenue producing divisions. If there is a question about a mark or a disagreement about a risk limit, the risk manager's view should prevail.

b) New compensation package. No one should get compensated with reference to only his or her own P&L. Compensation should include an annual salary plus deferred compensation, which is appropriately discretionary because it is based on performance over the entire year. For senior people, most of the compensation should be in deferred equity. Only the firm's junior people should receive the majority of their compensation in cash. All equity awards should be subject to future delivery and/or deferred exercise over at least a three-year period. And, senior executive officers should be required to retain the bulk of the equity they receive until they retire. In addition, equity delivery schedules should continue to apply after the individual has left the firm.

c) Support Fair Value Accounting. To increase overall transparency and help ensure that book value really means book value, regulators should require that all assets across financial institutions be similarly valued. Fair value accounting gives investors more clarity with respect to balance sheet risk.

d) Self-regulation has its limits. A robust regulatory regieme necessary. Capital, credit and underwriting standards should be subject to more "dynamic regulation." Regulators should consider the regulatory inputs and outputs needed to ensure a regime that is nimble and strong enough to identify and appropriately constrain market excesses, particularly in a sustained period of economic growth.

e) Regulation of hedge fund needed. All pools of capital that depend on the smooth functioning of the financial system, and are large enough to be a burden on it in a crisis, should be subject to some degree of regulation. Yes, that includes large hedge funds and private equity funds.

That sure means the compliance and the human resources department of banks may need to hire a lot of people. Are you ready?