The Delaware Chancery Court dismissed a claim brought against directors of a top-tier investment banking firm alleging breach of fiduciary duty for failure to establish appropriate compensation levels for its employees and monitor the firm's business operations. This failure supposedly resulted in compensation practices that encouraged employees to engage in risky and/or unlawful conduct. In dismissing the claim, the court relied on basic principles of Delaware law. The court stated that employee compensation decisions are a core function of a board of directors protected by the business judgment rule.
In re The Goldman Sachs Group, Inc. S'holder Litig., C.A. No. 5215-VCG (Del. Ch. Ct. Oct. 12, 2011