WILMINGTON, Del. (Legal Newsline) – A proposed settlement between Goldman Sachs Group and a shareholder received an unfavorable opinion from a Delaware vice chancellor.
On Oct. 23, Vice Chancellor Sam Glasscock III of the Court of Chancery of the state of Delaware ruled to deny the motion to settlement of derivative claims brought by shareholder Shiva Stein against Goldman Sachs.
"I do not find it reasonable to approve a settlement that effectively resolves direct claims belonging to the plaintiff in return for voiding potentially meritorious monetary causes of action belonging to the company (Goldman Sachs). Therefore, I cannot approve the proposed settlement," Glasscock wrote.
In May 2017, Stein filed suit against Goldman Sachs Group’s directors as well as against Goldman Sachs. According to the filing, the complaint contained two derivative counts for relief, as well as direct claims brought individually, and not on behalf of a class, by the plaintiff as a stockholder of the company.
"Here, the claims compromised are allegations that the company's directors are liable to the company for excessively compensating themselves and for issuing stock-based incentive awards in reliance on stock incentive plans that were void at the time of the award," Glasscock wrote.
Stein alleged Goldman Sachs directors failed to disclose material information to stockholders "when they approved Goldman Sachs' 2013 and 2015 Stock Incentive Plans," the filing states.
By doing so, Stein alleged the directors were in breach of their fiduciary responsibility to disclose "material information in the 2015, 2016, and 2017 proxy statements concerning the tax deductibility of cash-based incentive awards to named executive officers made from 2011 to 2016," the filing states.
A motion to dismiss was filed by Goldman Sachs directors in July 2017, but it was not argued or decided. In March, the parties submitted a stipulation and agreement of compromise, settlement and release.
According to the filing, as part of the agreement, Goldman Sachs agreed to include in the 2018 proxy statement that the nonemployee director compensation is "the highest among its U.S. peers," to reiterate the good faith standard, and other disclosures.
Additionally, the filing states that "for three years after the final approval of the settlement, the company will continue certain director compensation practices, and disclose them in its annual proxy statements."