Shareholder-derivative claims are on the rise as economic turmoil roils the markets and corporate governance draws closer scrutiny from investors suffering significant losses. Where conflicts of interest may preclude board involvement, a properly constituted special litigation committee offers an efficient and effective way to address derivative claims.
As our country suffers from widespread economic turmoil, there is renewed focus on, and a propensity to second-guess, boardroom decisions taking place in our companies.1 Questions over executive compensation, company perks, and other areas of potential self-dealing attract the attention, as well as the ire, of shareholders suffering significant losses on their investments. This focus is not limited to publicly traded companies, but applies across the spectrum, ranging from the largest Fortune 500 corporations to the smallest closely held companies. No matter the size, shareholders are taking a closer look at their company’s dealings, especially when the company’s directors or officers have a personal stake in the outcome of those decisions.
