Investor and Consumer Advocates Stop Corporate-Backed Attempt to Limit Class Actions

September 25, 2007
Corporate Governance Newsletter

A coalition including the Consumer Attorneys of California, Foundation for Taxpayer and Consumer Rights, Coughlin Stoia, and other consumer, labor, investor rights and civil rights groups has forced a corporate lobbying group to withdraw its initiative designed to severely restrict California class actions.

The initiative was sponsored by the Civil Justice Association of California (CJAC), a lobbying organization consisting of multi-national corporations.  In an attempt to avoid future accountability, the corporations, including semiconductor manufacturer Intel, filed an initiative that would have virtually eliminated the ability for investors and shareholders to recoup losses from corporate wrongdoers.  The pro-investor, pro-consumer coalition responded swiftly and strongly, urging the corporate sponsors like Intel to withhold their financial support of the initiative.  The response included online and television ads and resulted in tens of thousands of faxes sent to corporate directors asking them to withdraw the irksome initiative.  While the coalition of pro-consumer and civil rights groups was rallying others to defeat the CJAC proposition, one of its corporate backers, Intel, revealed its true colors in a print ad for its DualCore product featuring a white man surrounded by six African-Americans bowing down.  The ad ignited widespread furor, and civil rights groups were quick to respond, admonishing the chip maker:  “You recently recognized how an advertising campaign misusing the images of African-American athletes was insensitive and deserved to be withdrawn. We hope you will again thoughtfully respond by recognizing the unintended consequences of CJAC’s proposed initiative and withdraw it.”

The coalition also filed response initiatives to hold corrupt corporations accountable, including the Corporate Accountability Act to take away any illegitimate pay and investment income from executives who are convicted of corporate fraud, and the No Say No Pay Act to require publicly traded companies to release information about the pay for top executives, allow stockholders in those companies to vote on compensation levels for top executives, and allow shareholders to file class action lawsuits against executives and board members if executive pay and benefits are approved – or pay is altered – without shareholder approval.

The corporate-lobbying group quickly backed down and abruptly asked the state Attorney General to withdraw the CJAC initiative.  The pro-investor, pro-consumer initiatives remain in the process and may ultimately appear on the California ballot.  “Our political response has sent a strong message to those corporations who violate the law, then seek to evade accountability through the political system,” said Coughlin Stoia partner Timothy Blood, who led the firm’s efforts to defeat the ballot initiative.

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