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An Introduction to the Law of Corporations: Cases and Materials, Fall 2017

In Re The Goldman Sachs Group, Inc. Shareholder Litigation

Headnote

In recent years executive compensation has soared to almost unimaginable levels. It is not uncommon to see headlines about an executive being paid multiple million dollars a year to run a failing business. You have probably seen headlines like those and thought to yourself: "What a waste." You wouldn't be alone.

Following the financial crisis of 2008 a number of very high profile cases were brought on behalf of stockholders against boards alleging among other things that the compensation schemes deployed by boards amounted to a "corporate waste" and that they even created incentives that encouraged excessive risk-taking, bringing the entire economy to the brink of collapse. Goldman Sachs, the case that follows, is an example of such a case. The court is asked to rule on whether the executive compensation plan approved by the board amounted to a "corporate waste". As you will see this standard is very difficult to meet.