Lawsuits to rein in bonuses

You know things are a little whacked when your own shareholders sue you over bonuses.

Goldman Sachs Group Inc is being sued by an institutional investor who claims the firm is preparing to pay out improper bonuses.

Naturally, shareholders want more, but in this case, they believe they deserve it.  According to an article last month:

Despite record net income and compensation at Goldman as markets rebound and the firm outmuscles weakened rivals for business, analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to its 2006 earnings...  The decline is caused by issuing more than 100 million shares in the past year to bolster Goldman's financial position and capital.

The article raises the question about whether Goldman changed the way it accounts for consultants in order to make the average bonus look lower.  The conclusion seems to be that no change occurred, but questions like these will continue when 1) you faced death and survived due to help from the government, wealthy friends, and shareholders, who allowed getting diluted due to the circumstances, and 2) you played accounting games before.

In fact, given the disappearance of the worst month in its history (thanks to the accounting games), these bonuses may indeed be improper.  Including December, this is most definitely not a record year and therefore not deserving of record bonuses.

Bonus culture has ended its usefulness.