Meaningful reforms are needed to curb excessive shareholder class action lawsuits that impose a “real cost” on Australian businesses and society, writes Chris Merritt, legal affairs editor for The Australian.
Merritt notes that Attorney-General George Brandis is planning to reform what he has described as “opportunistic class actions that are launched in the name of shareholders.”
“Securities class actions have already cost the insurers several hundred million dollars,” he writes. “Many of the nation’s biggest companies have doubled the amount of cover they have against class action settlements.
“This is a direct increase in the cost of doing business that erodes profitability and dividends.”
Merritt’s post follows a story in The Australian earlier this month about Australian business organizations’ support for the government’s “planned crackdown on opportunistic securities class actions.”
“There are entrepreneurial lawyers out there who don’t necessarily have the best interests of the legal system, the defendants, or the integrity of the court at heart — which is the duty of lawyers,” said Rob Elliott, policy general manager of the Australian Institute of Company Directors.
The Governance Institute was quoted in the same story, calling excessive shareholder lawsuits “blackmail suits,” and saying, “the current system is conducive to initiating unmeritorious class actions in the hope of forcing a settlement.”