The notion that securities litigation can be used to improve corporate governance has officially arrived.
When The Wall Street Journal ran a special section on corporate governance earlier this fall, the newspaper included a piece on the growing use of securities litigation as a tool for change. We view this as a milestone – a coming of age, if you will. But it is something the plaintiffs’ bar and active public pension attorneys have known for years.
The article is particularly significant given the source. After all, the Journal has traditionally limited its coverage of securities class actions to straight factual coverage of large settlements and nasty editorials about plaintiffs’ attorneys.
The Journal’s coverage isn’t the only sign of mainstream status. Securities litigation as a whole is increasingly viewed as an appropriate measure to remedy bad corporate behavior. The Council of Institutional Investors, for example, is now drafting securities litigation guidelines to help its members. (See our article on page 6 on remarks by CII’s Ann Yerger to state pension administrators.) The National Association of Public Pension Attorneys already provides similar guidance.
While we are pleased that corporate governance settlements are gaining respect, we feel we must correct something for the record: the myth that corporate governance reform comes at the expense of shareholder payouts. In our experience, this is patently false. We only turn to negotiating governance reforms after we have reached an acceptable financial settlement.
Take, for example, the case of Enterasys Networks, in which we represented lead plaintiff the Los Angeles County Employees Retirement Association. David Muir, chief counsel for LACERA, told the Journal that no governance issues were discussed until damages were negotiated.
Despite claims to the contrary from some critics, our chief concern is – and always will be – achieving top dollar returns for defrauded clients. Corporate governance reform is a valid and worthy goal, but only after shareholders receive adequate compensation for their losses.
As our partner Glen DeValerio told the Journal, class action lawsuits are “just one more weapon in the war being waged, largely by public institutions, to improve corporate governance practices.”
And when it comes to negotiation time, we don’t – and won’t – swap governance for cash.
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.