Institutional Investors Seek Hearing Date on Expedited Request to Block Goldman Sachs' 2009 Bonus Packages

Complaint names CEO Lloyd Blankfein, COO Gary Cohn and company board members; says 2009 performance attributable to government bailout not employee performance

Motion is critical as Goldman is scheduled to issue $22 billion in 2009 bonuses later this month

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Grant & Eisenhofer P.A.

Jan 12, 2010, 12:57 ET

NEW YORK, Jan. 12 /PRNewswire/ -- Two U.S. pension funds that have filed lawsuits against Goldman Sachs Group, Inc.'s board of directors have asked the court to schedule an expedited hearing on their request to block the payments. The suits allege that the firm's impending record-setting 2009 compensation payouts, estimated to be in excess of $22 billion, are a breach of the board's fiduciary duty. The motions were filed today as Goldman is expected to announce its final 2009 compensation and issue payments to its employees in the coming weeks.

The plaintiffs contend Goldman's payouts are based on a trillion dollar investment made by the American taxpayers that was meant to stabilize the financial industry. Central Laborers' Pension Fund and the Security Police and Fire Professionals of America Retirement Fund have accused Goldman's board of directors of blindly following a pre-set policy that sets compensation at nearly 50% of the firm's revenues without regard to the source of the revenues, the employees' performance, or the best interests of the corporation or its shareholders.

When Goldman went public in 1999, the board of directors adopted a policy of paying approximately 50% of net revenues every year as compensation for employees regardless of whether such an award is justified by the performance of the company or the efforts of its employees. Since going public, Goldman has paid out a staggering $104.9 billion in compensation to its employees. In contrast, Goldman's net earnings during the same period have been only $46.8 billion.

Goldman's board defends its policy by touting it is guided by a "pay for performance" philosophy. However, the majority of Goldman's reported earnings for 2009 was not built on the successes and achievements of the company's employees. Instead, no less than 67% of Goldman's 2009 revenues were directly attributable to federal government intervention, including a $13 billion payment from AIG to Goldman which was a direct result of TARP funds.

Note: Grant & Eisenhofer P.A. represents institutional investors and shareholders internationally in securities class actions, corporate governance actions and derivative litigation. The firm has recovered more than $12 billion for investors in the last five years, including a $3.2 billion settlement from Tyco International, a $448 million settlement from Global Crossing and a $400 million settlement from Marsh & McLennan. G&E has also been selected among The National Law Journal's "Plaintiffs' Hot List" for the past five years, and is a member of its Hall of Fame. RiskMetrics Group named Grant & Eisenhofer the Number 1 law firm in average shareholder recoveries in securities class actions in 2007 and 2008. For more information, visit www.gelaw.com.

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