And both organizations set even stricter limits for corporate officers—for ISS, the limit is two boards not including one’s own board; for Glass Lewis it is two boards period.
The Council of Institutional Investors, which has a policy in line with Glass Lewis, adds that “Currently serving CEOs should not serve as a director of more than one other company, and then only if the CEO’s own company is in the top half of its peer group.” When directors serve on too many boards, ISS and Glass Lewis recommend votes against them come annual proxy season.
“We consider there are likely to be very few, if truly any, attractive alternatives to a share swap with Barrick.” ISS said the share-only deal will offer “greater certainty for shareholders” and de-risk their investment by spreading it around.
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But while the observation that plaintiffs’ lawyers are preferring shareholders’ derivative lawsuits appears to be valid, this observation does not explain plaintiffs’ lawyers are so eager to file derivative lawsuits.
Traditionally, derivative lawsuits have not been nearly as lucrative for plaintiffs’ lawyers as securities fraud suits.
Read more: Odey hedge fund backs Barrick Gold takeover of Acacia Mining A year later Tanzania arrested three Acacia employees, holding them without trial or bail.
Shareholders are due to vote on the deal on 3 September.
But there need to be numerous caveats around the purported value of the AOL Time Warner derivative settlement (see the prior post concerning the AOL Time Warner settlement here) and the Oracle settlement with its payment to charity rather than to the company requires a very big asterisk (and is probably a worthy topic of a separate post).
The Hollinger settlement may be more apposite, but it may also represent an extreme case.
The Glass Lewis Policy Guidelines also set a five-board limit.
Institutional Shareholder Services (ISS) once set six as the maximum number of boards a director can serve effectively; now five is the limit, according to the 2017 ISS Benchmark Policy Recommendations for the Americas.
In recent days, there has been extensive media attention (here and here) focused on the fact that plaintiffs’ lawyers seeking to exploit the options backdating scandal are filing shareholders’ derivative suits in preference to securities fraud class action lawsuits.
Indeed, running tally of options backdating lawsuits (here) shows that only 16 companies have been named in securities fraud lawsuits, but over 70 companies have been named as nominal defendants in shareholders’ derivative lawsuits.
So why are plaintiffs’ lawyers preferring derivative lawsuits in connection with the options backdating scandal?