Goldman Directors Said to Grab Excessive Pay

(CN) - Goldman Sachs' board of directors pays itself nearly twice what its peers JPMorgan Chase and Morgan Stanley pay their directors, unconscionably costing Goldman shareholders millions per year, a derivative suit claims.

Jeran Binning filed the lawsuit on behalf of The Goldman Sachs Group Tuesday against its lead director, Adebayo Ogunlesi, and 10 others in Delaware Chancery Court.

"Goldman's Board of Directors has unfettered ability grant its members an unlimited amount of stock as part of their annual 'compensation,'" the complaint begins. "The defendants have abused this power by paying themselves well beyond what could be considered reasonable or fair.

"In fact, over the past three years, Goldman has paid its non-executive directors on average almost $240,000 more per director than the Company's self-selected peer group. Due to large size of Goldman's Board, this excessive compensation has resulted in Goldman paying its non-executive directors millions of dollars more than they deserve," the lawsuit continues.

The board revealed its new compensation policy for directors in Goldman's April proxy statement, and explained that it wanted to align its compensation practice with "the general market practice of awarding director compensation in fixed-dollar amounts."

Previously, the board awarded its non-executive directors with 3,000 restricted stock units per year.

However, the fixed-dollar amount selected for the annual restricted stock grants is $500,000, "nearly twice what Goldman's peers pay their directors," Binning says. Combined with fees paid in cash, Goldman paid each of its directors an average of $586,000 in 2014.

In comparison, JPMorgan Chase, Morgan Stanley, Bank of America, and Citigroup paid their directors an average of $336,000 in annual compensation in 2014 - a difference of $250,000 per director.

The board allegedly did not seek stockholder approval for the new compensation package, nor did it tie compensation to Goldman's performance.

"By seeking the amount of RSUs at a value of $500,000, even if the company's stock performs poorly, the non-executive directors will still receive the same basic amount of compensation," the complaint says.

Binning says the new compensation practice is "excessive" and "manifestly unfair."

She claims that "while the company's stock has admittedly increased substantially over the past three years, it is moving in union with Goldman's peer group."

Binning seeks restitution from the directors of excessive compensation, and damages for breach of fiduciary duty and unjust enrichment.

She is represented by Blake Bennett with Cooch and Taylor in Wilmington, Delaware.

Goldman Sachs did not immediately respond to a request for comment.

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