Can Shareholder Lawsuits Police Companies’ Climate Disclosures?

In March 2022, the SEC proposed mandatory climate disclosures for public companies.[1]  While climate activist investors applauded the proposed rules, opponents lamented their scope and cost, arguing that the SEC lacks the authority to promulgate such rules. But the debate  largely overlooked a key point: The success of a climate disclosure regime – mandatory or voluntary – rests on accuracy of the disclosure.  By some accounts, the private right of action is the most effective way to prevent companies from providing misleading information to their shareholders.  The SEC lacks the resources  and, in a controversial area like climate, may … Read more

Is Everything Securities Fraud?

Securities litigation is almost inevitable for any public company.  Often, investors sue because the firm’s managers engaged in fraud that directly harmed the shareholders – say, by doctoring the firm’s financials or lying about known business prospects.  However, shareholders also sue their companies when those companies engage in conduct that more directly harms a different set of constituents.  When a pharmaceutical company sells dangerously contaminated drugs, a faulty car battery bursts into flames, or an oil rig explodes, it’s difficult to say that the direct victims of the misconduct are the companies’ shareholders.  Yet shareholders commonly base lawsuits under the … Read more