(September 27, 2011) — Goldman Sachs has won the dismissal of lawsuits over bonuses, Bloomberg has reported.
New York State Supreme Court Judge Bernard J. Fried dismissed the lawsuit with prejudice in his ruling, which combined cases brought by Illinois’ Central Laborers Pension Fund and an individual plaintiff, Ken Brown. The judge asserted that the allegations failed to provide any basis for the conclusion that the board acted for any purpose other than the advancement of the company’s interests.
In December 2009, Security Police & Fire Professionals of America Retirement Fund sued the investment bank, alleging that directors and executives breached their fiduciary duties by reserving half of the company’s net revenue for employee compensation. The following month, Brown and Central Laborers Pension Fund filed similar suits. The lawsuit stated that the bank’s policy of targeting a payout of close to 50% of net revenue as compensation reflected “scant regard” for shareholder interests.
Goldman’s 2010 annual report showed that it paid out about $16.19 billion in compensation and benefits for 2009, or 35.8% of its net revenue of $45.17 billion, its lowest percentage payout as a public company.
The case is Central Laborers’ Pension Fund v. Blankfein et al, New York State Supreme Court.
Goldman Sachs is not the only bank to battle scrutiny over compensation from institutional investors. In February of last year, the Security Police and Fire Professionals of America Retirement Fund & Central Laborers’ Pension Fund labeled Morgan Stanley’s payouts as “unjust enrichment, ” accusing the bank of failing to administer its compensation plans in the best interests of the company and its shareholders.
“The payments are staggering not only in absolute and percentage terms, but also when one considers the losses suffered by Morgan Stanley’s shareholders between 2006 and 2009,” according to the complaint.
Including benefits, Morgan Stanley paid its employees nearly $14 billion in 2006. A year later, the firm paid $16.6 billion to its employees (59% of its revenue for that year). In 2009, the firm paid $14.4 billion (62% of net revenue for the year).
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