BOSTON (Reuters) - Goldman Sachs Group Inc pays employees a much bigger portion in stock than Wall Street rivals, a trend that has come into sharper focus as the bank overhauls its business strategy.

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid/File Photo

Goldman’s “burn rate” – the proportion of outstanding stock used to pay everyone from Chief Executive Officer Lloyd Blankfein to rank-and-file workers – averaged 3 percent over the past three years, the bank said on Friday in its annual proxy filing with the U.S. Securities and Exchange Commission.

That three-year burn rate compares with 0.64 percent recently reported by Citigroup Inc, and 1.82 percent at financial companies in the S&P 500, according to proxy adviser Institutional Shareholder Services (ISS).

Big investors take notice of a burn rate because it measures how much value a company transfers to executives, said John Roe, head of ISS’s data arm.

“The faster the company is diluting shareholders, the harder the company has to work just to get up to par,” Roe said.

Investors asked Goldman to put a special focus on its stock grant practices and how they dilute shareholders during feedback sessions last year, the bank said in its proxy filing. A spokeswoman declined to comment further.

If the high burn rate persists, Goldman stock could become less attractive to investors relative to its peers while potentially weighing on its operating performance.

Although Goldman slashed its annual burn rate to 2.2 percent last year from 6.6 percent in 2010, it remains elevated partly because of its business mix, which the bank is now trying to change.

Unlike rivals that have big retail operations stocked with bank tellers and other salaried branch workers, Goldman’s workforce is more weighted with investment bankers and traders. They typically receive a hearty portion of their pay in stock. That is by design, to better align their interests and risk-taking with shareholders.

Goldman also has been aggressively buying back stock, which elevates the burn rate. The bank has reduced outstanding shares 27 percent since the end of 2009, giving it a historically low share count, according to its proxy.

CHANGES AFOOT

Looking ahead, Goldman is moving into businesses like digital banking to offset declines in bond trading, its one-time profit engine. It has also been shifting workers from big cities to low-cost hubs to cut compensation expenses. Those trends could help subdue its burn rate. (reut.rs/AdGtFv)

Goldman finds itself using “muscles we never exercised before” as it shifts toward consumer-facing businesses, Blankfein told an audience in Boston last week.

“For us, there’s an evolution here. We became a bank holding company over a weekend,” Blankfein said, alluding to a move forced by the 2007-2009 financial crisis. “We didn’t do a lot of bank-like activities that could even be in a bank.”

Building “Goldman Sachs 3.0” is a process that will take time, he said.

As the biggest individual holder of Goldman shares, Blankfein arguably has more at stake in the transition than anyone else. The 2.3 million common shares he owns is worth about $571 million, according to the company’s proxy.