Most What Went Wrong (WWW) cases conclude with significant fines and sanctions against the respondent/defendant.  Such was not the case for 12 directors of Morgan Stanley who escaped a lawsuit filed by shareholders who accused them of letting the Wall Street bank overpay its employees even while accepting taxpayer-funded federal bailouts. However, the fates of Morgan Stanley's current CEO James Gorman, and his predecessor,  John Mack, are still on the hook, because Judge Louis H. Kornreich had not decided the merits of the claims against them. Accusations. Shareholders accused the outside directors of corporate waste and breaching their duties by setting aside 62% of net revenue, or $14.3 billion, for compensation in 2009.  They said the amount was excessive given that Morgan Stanley had lost $907 million that year and previously had accepted a $10 billion government bailout.  The bailout has since been repaid. Shareholders sought to have incentive payments made in 2006 and 2007 clawed back because they were based on results goosed by excessive risk-taking and which the 2008 global financial crisis had shown to be ephemeral. Appeals Court Ruling - Lacking Conflicts of Interest. A NYS appeals court panel in Manhattan - with 5 judges on the panel - said the shareholders should have demanded that the board make changes before suing.  They did not.  Nor did they, according to the panel, show that the board had conflicts of interest that would have made such a demand futile.  In fact, the shareholders didn't show any "reason to doubt that the directors' compensation awards were the product of a valid exercise of business judgment."  The 5-justice panel issued an unsigned opinion. The original lawsuit had been filed on behalf of the Security Police and Fire Professionals of America Retirement Fund of Roseville, MI, and other shareholders.  It is one of many lawsuits challenging Wall Street pay practices.  Thursday's decision upheld a December 2010 ruling by NYS Supreme Court Justice Shirley Kornreich. Shareholder lawyer Jay Eisenhofer and Morgan Stanley spokesperson Mark Lake had no immediately responses.  MS's ratio of compensation to net revenue fell to 51% in 2010 and 2011, a regulatory filing showed. The case: Security Police and Fire Professionals of America Retirement Fund et al v. Mack et al, NYS Supreme Court, Appellate Division, 1st Department, No. 7175A. For further details, go to:   [Reuters, 3/22/12].