The Stoneridge v. Scientific Atlanta securities fraud case, heard last week in the U.S. Supreme Court, has sparked much commentary on the state of class-action litigation, especially — from the perspective around here — suits ginned up to shake loose settlement money without ever going to court. (Media roundup here.)
We’re reasonably optimistic about the Supreme Court deciding for the respondents in Stoneridge, a decision that would prevent an expansion of far-fetched litigation based on scheme liability. And indeed, the trends seem to be going in the right direction here in the United States since the passage of the Private Securities Litigation Reform Act in 1995 (and, perhaps, after the 2005 enactment of the Class Action Fairness Act). We previously mentioned the USA TODAY story that highlighted the fewer suits.
The Economist identifies this trend as extending beyond the United States. France, Germany, Japan, the EU:
On October 3rd the European Commission abandoned its long-running attempt to introduce the principle of “one share, one vote” into European law. The change would have strengthened legal protection for minority shareholders, which is notoriously weak in parts of the European Union. The prime opponents were lobbyists for big shareholders such as Sweden’s Wallenberg family, which uses special shares to retain control of the dynasty’s businesses.
That notoriousness had escaped our attention.
The article takes a position that, by definition, shareholder activism is a good thing. Well, sure, it’s a nice-sounding term. If the activism is targeted at accountability and corporate policymaking, fine. If it’s extortion via litigation, then no, it’s a drain on the economy that destroys value and damages other shareholders who are not part of the attack.
In any case, bias aside, The Economist piece does an OK job of surveying the global scene.
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