Labaton, Edward; Stocker, Michael W. --- "It’s Time to Resuscitate the Shareholder Derivative Action" [2010] ELECD 700; in Mitchell, E. Lawrence; Wilmarth, Jr, E. Arthur (eds), "The Panic of 2008" (Edward Elgar Publishing, 2010)

Book Title: The Panic of 2008

Editor(s): Mitchell, E. Lawrence; Wilmarth, Jr, E. Arthur

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802611

Section: Chapter 11

Section Title: It’s Time to Resuscitate the Shareholder Derivative Action

Author(s): Labaton, Edward; Stocker, Michael W.

Number of pages: 10

Extract:

11. It's time to resuscitate the
shareholder derivative action
Edward Labaton and Michael W. Stocker*

INTRODUCTION

Even in the midst of the spectacle of collapsing automobile giants and
banks teetering on the brink of insolvency, little has outraged the public
as much as abuses of executive compensation. While the credit crisis
and plummeting real estate values may have resulted in more wide-scale
damage, the trust and confidence of the American public were profoundly
shaken when AIG's board approved hundreds of millions of dollars in
bonuses to many of the same executives who had run the company into
the ground.
AIG management was hardly alone in pocketing king-size bonuses in
the midst of the greatest financial disaster of the last 70 years. In 2007,
as the bubble economy began its death plunge, Goldman Sachs, Morgan
Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns handed out
about $36 billion in performance-related bonuses to top executives. Less
than two years later, Lehman was bankrupt, Merrill Lynch had been
forced into a shotgun marriage with Bank of America, and Bear Stearns
was saved from bankruptcy only by its eleventh-hour rescue by JP Morgan
Chase, subsidized by American taxpayers.
Most frustrating to the public is that there is apparently so little that can
be done to rein in this outrageous waste of corporate assets. Legislators
argue that their hands are tied by the contracts companies have entered
into with executives. Boards of directors have thus far shown little appe-
...