US - A pension fund is suing Goldman Sachs alleging officials and the board breached their fiduciary duties by allowing an expected US$22bn in 2009 bonuses.
According to the complaint, the Security Police and Fire Professionals of America Retirement Fund claims the estimated $22bn payout is "not based on the hard work of the executives," law firm Grant & Eisenhofer, which is representing the pension fund, said in a release.
"Instead, the plaintiffs contend, the payouts are based on a trillion dollar investment made by American taxpayers that was meant to stabilize the financial services sector," Grant & Eisenhofer wrote.
Goldman spokesman Samuel Robinson said: "We believe the suit is entirely without merit." Robinson said the total bonus payments for 2009 have not been made public yet and declined to comment on the $22bn figure.
During the financial crisis, Goldman received $10bn from the federal government as part of a $700bn package to revive the financial sector, and received a guarantee from the Federal Deposit Insurance Corporation that allowed it to issue cheap debt.
It has since repaid the $10bn received through the troubled asset relief program and posted strong quarterly earnings of $12.3bn in the third quarter.
But the firm came under fire for the amount it is expected to pay out in bonuses.
"According to the complaint, Goldman's board routinely pays out half of its reported annual net revenue as compensation without regard to whether its results were attributable to the productivity and performance of the company's employees. Many of its shareholders have objected to the enormous bonus pool contemplated for 2009. Goldman's 2009 results are largely based on taxpayer funds," the law firm said.
The suit comes just four days after Goldman announced its 30-strong management committee will receive bonuses in the form of shares-at-risk instead of cash. The shares can be relinquished for up to five years if the firm finds the executive engaged in "materially improper risk analysis".
Goldman also said shareholders will have an advisory vote on compensation.
Goldman chairman and chief executive Lloyd Blankfein said of the new structure: "The measures that we are announcing today reflect the compensation principles that we articulated at our shareholders' meeting in May. We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm's performance and incentivizes behaviour that is in the public's and our shareholders' best interests."
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