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.