A recent article in the New York Times by Julie Creswell says that class-action lawsuits filed on behalf of shareholders in the wake of the collapse of companies like Enron and WorldCom have mostly not materialized, although over 80 companies are being investigated for backdating of stock options.
Creswell observes that lawyers are turning to what are called derivative suits, in which a shareholder sues on behalf of the company and settlements usually consist of corporate governance changes and legal fees.
So far, at least 57 companies have been sued in this way; some 15 class-action securities cases have been filed.
Proponents argue that the derivative lawsuits give shareholders a chance to force changes at the company, but critics counter that they do little more than produce fees for lawyers.
While legal fees are typically low in derivative suits, there have been a handful of high-profile cases where they amounted to millions.
Lawyers who filed a derivative suit involving accusations of insider trading by Lawrence J. Ellison, CEO, Oracle, received more than $22 million in fees and expenses for brokering an unusual settlement, which included Mr. Ellison making a $100 million contribution to charity.
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