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Econwatch
March 9, 2010 12:01 PM

Goldman Sued for Overpaying Executives

By
Alex Sundby
Topics
In The News

Goldman Sachs logo

The pension fund for an electrical workers' union wants to pull the plug on large executive compensations at Goldman Sachs, filing a lawsuit against the bank in a Delaware court.

The International Brotherhood of Electrical Workers pension fund said the bank allocates about 47 percent of its 2009 revenue toward compensation, according to the Reuters news agency. The lawsuit aims to recoup some of the compensation for Goldman shareholders, saying the payments "vastly overcompensate management and constitute corporate waste."

Last week, Goldman said it would limit its compensations for last year at a 36 percent ratio or $16.2 billion. In early February, Goldman revealed it would pay CEO Lloyd Blankfein a $9 million stock bonus for 2009.

The lawsuit also directly targets Blankfein, saying that he and other executives should be in charge of allocating charitable donations the bank pledged as a way to make amends for its behavior. The bank's shareholders are now responsible for making decisions about those donations.

"We believe the lawsuit is completely without merit," Goldman spokesman Ed Canaday told the news outlet. A lawyer for the union's pension fund did not return a Reuters phone call.

Goldman took money from the federal government's bank bailout in 2008, but the bank has since paid back the money with interest and recorded record profits.

The lawsuit was filed in Delaware Chancellery Court.


  • Alex Sundby

    Alex Sundby is an associate news editor for CBSNews.com

Add a Comment See all 12 Comments
by tsigili March 15, 2010 9:34 AM EDT
Good. If they refuse to behave responsibly, then force it on them, through lawsuits, and fines.
Reply to this comment
by hateisafourletterword March 12, 2010 7:25 PM EST
Great idea. Now can we the taxpayers sue the UAW for the huge party they held in Miami last year (After Obama made Wells Fargo cancel a Las Vegas prepaid trip)?

I would love to see the rich union members repay the taxpayers for the cost of this trip too?

And why stop there. If more than 10% of students fail, make the teachers refund their salaries. We can keep this going until only George Soros and Al Gore have any money.
Reply to this comment
by mem18 March 10, 2010 12:51 PM EST
A method to control executive pay and improve the US economy is to encourage Corporations to create US Jobs and provide Health Care to their employees. This can be done by requiring two things of all corporations that provide any form of annual compensation to any employee, officer or director in excess of 125% of the salary of The US President ($500,000).
1) That the number of full time equivalent US Citizens employed by the corporation has increased by at least ?% from the previous calendar year.
2) That the corporation provides health insurance that meets only federal standards, to all its employees. While the patient co-pay per day for such insurance shall not exceed amount of 1 hour of the employee?s pay for doctors visits, or 2 hours pay for hospital visits. The amount of monthly employee health insurance contribution shall not exceed 8 hours pay for individual or 16 hours for family coverage. Salaried employees? hourly rate shall be found by dividing their average weekly compensation by 40.
Healthy corporations that can afford to pay someone more than $500,000 can afford to do the two things above. Any corporation cannot afford the above is not healthy cannot afford to pay excessive compensation either, and those who receive it should have to refund it or have it taxed away.
Reply to this comment
by midlclass March 12, 2010 4:27 PM EST
good ideas send a copy to your congressman.
by midlclass March 12, 2010 4:28 PM EST
good ideas send a copy to your congressman. better yet join the coffee party. and use it there
by tsigili March 10, 2010 10:47 AM EST
Great. These big abusers of corporate responsibility, need to be made to change their ways.
Reply to this comment
by pragmatist1 March 9, 2010 5:44 PM EST
I'll bet these same types don't mind when an attorney takes over one-third of the settlement in a personal injury lawsuit. Or their favorite sports celeb makes millions for playing a game of sport. Somehow that's different, now isn't it? Sounds like Goldman should end its relationship with the union and tell them to find some other investment house to take care of their funds; let's see if the union will fare any better. Some might even argue that union electricians are overly paid with their huge salaries.
Reply to this comment
by tpcc March 9, 2010 2:06 PM EST
Out of the hundreds of institutional investors with even larger holdings, how many do you guess will actually join The International Brotherhood of Electrical Workers in this lawsuit? It's a waste of time. If you don't believe in 36% or more of payout of net profits in bonus, you should stay away from investing in this whole industry all together.
Reply to this comment
by tpcc March 9, 2010 2:05 PM EST
Out of the hundreds of institutional investors with even larger holdings, how many do you guess will actually join The International Brotherhood of Electrical Workers in this lawsuit? It's a waste of time. If you don't believe in 36% or more of payout of net profits in bonus, you should stay away from investing in this whole industry all together.
Reply to this comment
by thesevenveils March 9, 2010 12:49 PM EST
Why would any shareholder believe that even doling out 36% of a companies net profits to executives is proper business practice? That is like tipping the cashier at the grocery store for doing their job. Any and every shareholder should be in an uproar over the squandering of their stock profits.
Reply to this comment
by ajvw March 10, 2010 7:59 AM EST
"Why would any shareholder believe that even doling out 36% of a companies net profits to executives is proper business practice?"

maybe because these executive have protected my investments for the last 10 years. other than that, i can't think of a reason.
by midlclass March 12, 2010 4:32 PM EST
AVJW more like milked you like a big cow for ten years. but if you can afford it no big deal.how would you feel about paying 36% in taxes?
See all 12 Comments
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