Wednesday, March 10, 2010 4:46:04 PM
Another Pension Fund Sues Goldman for 'Unreasonable' Compensation
A pension fund for an electrical workers' union filed a
lawsuit against the bank in a Delaware court.
(March 10, 2010) – Goldman Sachs faces yet another lawsuit, as a union plan filed suit against the banking giant over executive pay.
“Goldman’s employees are unreasonably overpaid for the management functions they undertake, and shareholders are vastly underpaid for the risk taken with their equity,” the suit states, Reuters reported. But according to Goldman, the lawsuit is entirely without merit.
The $562 million International Brotherhood of Electrical Workers Local 98 pension fund (IBEW) accused Goldman Sachs of overpaying its executives while underpaying its shareholders, hurting its stock price. The suit, filed March 8 in Delaware Court of the Chancery in Wilmington, aims to recoup some of the compensation by preventing the bank from allocating nearly half (47%) of its 2009 net revenues to compensation. The lawsuit claims the payments "vastly overcompensate management and constitute corporate waste."
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Chairman and CEO Lloyd C. Blankfein, 11 other Goldman Sachs directors, and David A. Viniar, executive vice president and CFO, and J. Michael Evans, vice chairman, are also named as defendants in the case.
In 2008, Goldman took advantage of the federal government's bailout and has repaid the money with interest. During the fourth-quarter of 2009, the New York-based bank posted $4.79 billion in profit, the biggest quarterly gain ever for the bank. The previous record was $3.16 billion during the same period of 2007. Despite its record profit, Goldman said last week that it would cap 2009 compensation expense at $16.2 billion.
The suit follows the Security Police and Fire Professionals of America Retirement Fund's suit against Goldman in December over the bank's alleged use of TARP and FDIC-backed funds to pay executive bonuses. The $5.8 billion union pension plan alleged that the estimated at $22 billion in bonus payments were not the result of executive performance.
To contact the aiCIO editor of this story: Paula Vasan at pvasan@assetinternational.com; 646-308-2742.
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