Goldman Sachs Offers Director-Pay Cut to End Investor Suit

(Bloomberg) -- Goldman Sachs Group Inc. agreed to cut pay for some board members to settle a shareholder lawsuit alleging the bank's compensation plan was too generous.

It's the second attempt by Goldman Sachs to settle the 2017 Delaware Chancery Court suit after a judge rejected its first offer to make corporate-governance changes related to pay plans.

Under the current offer, Goldman Sachs would limit the annual pay of non-employee directors to no more than $475,000 over the next three years and disclose the change to stockholders, according to court filings. The payment can be made in cash or restricted stock grants.

That plan would cut the pay of some outside directors by as much as $130,000, bringing them more in line with what other Wall Street banks pay non-employee board members, according to court filings. Among the directors affected would be former DuPont Inc. Chief Executive Officer Ellen Kullman, former Harvard University President Drew Gilpin Faust and ex-U.S. Navy Vice Admiral Jan Tighe.

Maeve DuVally, a Goldman Sachs spokeswoman, didn't immediately respond to a request for comment on the proposed settlement.

In court filings, the bank denied any wrongdoing in connection with compensation plans and said the company decided to settle the case to “eliminate the burden, inconvenience, expense, risk and distraction to defendants of further litigation.”

Shiva Stein, a Goldman investor, challenged the stock-incentive plan for managers and directors, saying it wasn't properly outlined to shareholders and provided excessive pay to some officials. In the complaint, Stein's lawyers said outside directors at four similar companies got an average of $352,000 a year in cash or stock options. Some Goldman directors made nearly double that figure.

Judge Sam Glasscock rejected Goldman's previous settlement, in which the bank said it would disclose more about the executive-compensation plan and hire a consultant to review directors' pay packages. Glasscock said directors weren't giving up anything of economic value as part of the so-called disclosure settlement.

Glasscock must decide whether the new settlement offer provides enough consideration in exchange for Stein dropping her suit. He also must decide on a request by Stein's lawyers to be paid $1.5 million in fees and costs.

The case is Stein v. Blankfein, No. 2017-0354, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth

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