This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Settling for Reform

The settlements in August came about three months after another significant agreement involving Hanover Compressor (HC). The most groundbreaking provision of that settlement allows shareholders with more than 1% of outstanding shares to nominate candidates for two new independent director positions.

Among the first securities cases to include corporate-governance provisions in a settlement was the historic Cendant (CD) suit at the end of 1999, according to McGurn of ISS. In the largest monetary settlement in history, at $2.83 billion, Cendant agreed to get shareholder approval before repricing stock options, ensure that the majority of its board would be independent within two years of final approval of the settlement, and ensure that the board's audit, compensation and nominating committees will be composed of only independent directors.

Such provisions have picked up in popularity in the past couple of years, largely as fallout from the rash of corporate scandals at companies such as Enron and WorldCom.

It's a "post-Enron situation where people are keenly attuned to the idea that corporate abuse is only going to be stemmed by this type of corporate governance," says Bruce Simon, an attorney with the Burlingame, Calif.-based firm Cotchett Pitre Simon & McCarthy, who represented California State Teachers' Retirement System in its suit against Homestore.

Few shareholder suits go to trial; the vast majority are settled first. But it may appear that more are settling recently simply because more were filed in the period after the dot-com and stock market bust in March 2000 and subsequent rash of corporate scandals. Most shareholder suits settle after 2 1/2 years, experts say.

That said, a lawsuit is usually not the first choice -- but rather the last resort --for institutional shareholders to win changes in corporate governance.

"You'd rather be reaching these things through dialogue and the board of directors," said ISS' McGurn.

But he noted that in Siebel's case, the company took an adversarial stance when it faced shareholder measures on expensing stock options and tying executive compensation to performance at its annual meeting in June. (A majority of shareholders voted down the measures.)

"Frankly, it shows these people pick up a lot of interest in reform when a lawsuit is involved," McGurn said. "To me that's a little bit sad. You'd like to see companies and boards doing governance reform because they believe it's the right thing to do."
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
HOMS $0.34 -2.86%
AAPL $94.99 -0.02%
FB $99.54 -0.21%
GOOG $678.11 -0.68%
TSLA $148.25 0.18%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs