A shareholder derivative complaint filed by Security Police and Fire Professionals of America Retirement Fund and Judith A. Miller Living Trust is accusing Goldman Sachs Group Inc. executives of breaching their fiduciary duties for failing to modify the investment firm’s compensation policies according to the best interests of shareholders.
Goldman’s usual policy is to place 44-48% of its net revenue in employee compensation, which includes bonuses. The plaintiffs say these breaches were even greater this year because of federal funding that the investment bank received in 2008 and 2009. According to the complaint, this means that although the firm’s revenues are not related to employee performance, Goldman executives are still being rewarded for corporate performance.
Goldman Sachs is expected to pay its employees about $22 billion (including bonuses) this year. Now, the plaintiffs are seeking to recover billions of dollars in compensation.
Goldman Sachs was the recipient of a $10 billion TARP loan. Pension fund officials claim the investment firm’s revenue for the year can largely be attributed to taxpayer money. In 2008, Goldman generated $29 billion in cash by issuing debts that the Federal Deposit Insurance Company had insured. It then obtained money from contractual counterparties that got their assets from taxpayers.
Meantime, Goldman Sachs says the claim is without merit. Earlier this month, the investment firm announced that its 30 most senior executives would receive their bonuses in the form of restricted stock instead of cash.
Goldman Sachs CEO Lloyd Blankfein is one of the executives named as defendants in the lawsuit.
Related Web Resources:
Read the Shareholder Derivative Complaint (PDF)
Pension fund sues Goldman over executive pay, Pensions and Investments, December 15, 2009
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