Goldman Sachs' Shareholders Object to Ginormous Banker Bonuses
Just in time for bonus season, Goldman Sachs has been hit with two shareholder lawsuits accusing the board of "bad faith actions and breaches of...loyalty" for approving billions in bonuses while driving the global economy into a ditch.
The suits, filed by the Illinois Central Laborers' Pension Fund and by an Illinois shareholder named Ken Brown, basically restate the case against Goldman that outraged nonwealthy people have been making all year: Goldman has paid out exorbitant bonuses (totaling 260% of the firm's net income last year) while betting against the housing bubble even as it sold bunk CDOs to suckers and forced AIG into the arms of a federal bailout so it could reap billions in taxpayer dollars and continue to finance those enormous bonuses.
It's all true, and we hope they win, but it's kind of hard to make the case that Goldman's shareholders have been harmed by the company's ruthless pursuit of money: The stock price seems to be doing OK, considering it's recovered more than 250% from the floor it hit in November 2008. And Goldman shareholders have gotten their quarterly dividend without interruption. The suits claim that Goldman's participation in the bailout, and Treasury Secretary Tim Geithner's recent claim that they would have been wiped out along with every other financial giant if the government hadn't intervened, serve as evidence that its "pay for performance" compensation structure was a grand fraud, and that the bonuses properly belong to the shareholders. This chart that we drew up a while ago but never published correlating Goldman's bonuses, earnings, and bailout benefits illustrates the dynamic:
But that line of attack takes a narrow view of "performance": Yes, Goldman executives were failures like the rest of Wall St. when it came to navigating the bubble. But they performed flawlessly at harvesting taxpayer dollars for their corporate and private gain. In the end, they still made the money. It's the taxpayers that ought to be suing them. The shareholders should be thanking them.