Last January, when I was still updating this blog regularly, I wrote about various unions bringing suit against Goldman Sachs for their compensation practices. In particular, they objected to the firm’s longstanding formula that employees would get about 45 percent of net revenues, with the bulk of their pay being determined after the company knew what those net revenues would be, i.e., as “bonuses.” The allegation was that this program (basically a profit-sharing system) created incentives toward excessively risky and short-term behavior against the interests of the shareholders. If the latter were true, and if the board approved of such a plan knowing that were true, it would arguably constitute a breach of their fiduciary duties. Of course, there are a couple of big “ifs” in that allegation, both of them needing some substantiation before a board’s culpability could even begin to be ascertained.
Last week, the Delaware Chancery Court decided that in the absence of any substantiation whatsoever, and insisting on these things called facts, that they had to dismiss the case.
I only wish that the fiduciaries who brought this fact-challenged suit could be held accountable for the far more provable waste of their investors’ resources for their personal profit, i.e., maintaining their union sinecures. Wouldn’t some enterprising plaintiffs lawyer love to find that e-mail from a top union official that says, “I know this case doesn’t have any merit, but hiring lawyers to publicly poke Goldman’s eye would help me get re-elected.” Or at least these enterprising lawyers could allege without any facts that this was the motivation. Alas, there is no private party willing to waste their own money to bring such a frivolous suit.