I try to monitor developments in the areas of corporate governance and compliance. One automated search I set up recently hooked a press release that caught my eye.
A company settling class-action shareholder derivative litigation is scarcely news. Last week CMS Energy joined this group. It announced a $12 million settlement, apparently funded by insurance. The case arose from alleged “round-trip trading” that ensnared some companies in the energy industry a few years ago.
Part of the settlment also reflected the efforts of CMS to improve corporate governance and compliance, such as appointing a compliance officer, implementing and training on a code of conduct, improving procedures for reporting compliance concerns and splitting the roles of Chairman of the Board and CEO. Laudable actions all, most of which have been adopted by many companies.
Then this paragraph jumped right off the page:
Robert Weiser, an attorney for the shareholder who brought the suit, commended CMS Energy for strengthening its corporate governance. â€œCMS Energy has made a substantial commitment to its shareholders. The policies adopted by the Company make it a national leader in the area of corporate governance. CMS Energy shareholders should be proud of the steps the Companyâ€™s Board of Directors has taken,â€ he said.
A governance testimonial from plaintiffs’ securities litigation counsel?
Since the press release is part of the related 8-K filing made by CMS, this was by design, perhaps bargained for as part of the settlement. A Google search indicates that the Detroit Free Press took the bait, and included this in an article.
Such testimonials aside, strong governance practices can also be measured by a clean compliance record and a rising share price.