Hanover Compressor
Unprecedented Corporate Governance Reforms
On February 4, 2002, five institutional and individual lead plaintiffs began a class action against Hanover Compressor Company in the United States District Court for the Southern District of Texas. The action alleged insider trading by the defendants, improper reporting and “sham” transactions similar to Enron’s infamous off-the-books SPE deals.
On May 13, 2003, Robbins Geller Rudman & Dowd LLP attorneys announced a settlement in
the case which went beyond a recovery of more than $80 million in
cash, stock and debt to include sweeping corporate governance changes
at Hanover, part of a growing trend. The settlement, if approved by
the Court, will be one of the top twenty largest securities class
action recoveries ever.
The corporate governance reforms are a key piece of the settlement and Hanover’s current management is to be commended for expending substantial effort in an attempt to craft a fair remedy for shareholders. The reforms cover seven basic areas:
- Director Independence
- Shareholder Nomination of Directors
- Internal Audit Reforms
- Revenue Recognition Policy
- Stock Options
- Independent Audit Reforms
- Insider Trading Controls
Among the many important reforms, this settlement represents the first time a class action has resulted in shareholders obtaining the power to fill board of directors’ seats. In addition, the changes implemented provide for a truly independent board of directors, require new executive option plans and mandate shareholder approval for repricing of existing stock options – a major step forward.
On February 9, 2004, in a press release Hanover Compressor Company announced Court approval of the settlement.
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