More Compensation Disclosure Doesn’t Settle Goldman Investor’s Claim

By | October 24, 2018

A bid by Goldman Sachs Group Inc. to settle a lawsuit over how much it pays directors was rejected by a judge who said that simply making changes in corporate governance didn’t provide enough benefit to the firm.

The investment bank’s willingness to disclose more about its executive-compensation plan and its hiring of a consultant to review directors’ pay packages weren’t enough to justify extinguishing the investor’s claims, Delaware Chancery Court Judge Sam Glasscock III concluded Tuesday.

“In return for a release of the monetary claims against them, the director defendants give up nothing,” Glasscock wrote in his decision.

The ruling comes as part of a chancery court crackdown on so-called “disclosure settlements,” in which companies resolve investor suits by make additional disclosures about deals or compensation and no cash changes hands.

Shiva Stein, a Goldman investor, sued the bank last year challenging a stock-incentive plan for managers and directors, saying it wasn’t properly outlined to shareholders. Besides hiring a consultant to review non-employee directors’ pay, the bank offered to make additional disclosures in its 2018 proxy, including that those board members’ compensation is “the highest among” their U.S. peers.

“We are disappointed that the settlement of these claims was not approved, but they remain subject to our pending motion to dismiss,” Michael DuVally, a Goldman spokesman, said in an email.

After Fordham University law professor Sean Griffith objected to the settlement, Glasscock’s analysis found Stein had “potentially-meritorious monetary causes of action” that were being extinguished without proper benefits in exchange. Griffith is one of a number of law professors who have called into question the value of disclosure settlements and routinely objects to such accords.

While Goldman’s disclosures and acts of “corporate hygiene” may have value, the judge found, they were “unrelated to the damages/disgorgement claims for conflicted over-payment that are the heart” of Stein’s suit.

The case is Stein v. Blankfein, No. 2017-0354, Delaware Chancery Court (Wilmington).

10/23/2018 03:35 PM

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